Market ProfileA way of reading the market that recognizes either time spent or volume traded at a particular price level. A market profile can be either made up of “TPO’s” (time price opportunities), or volume. TPO’s measure how much time was spent at a particular price, while volume-based market profiles measure how much volume traded at a particular price. Generally, market profile is used in the trading of futures, especially the /ES. ShadowTrader utilizes volume based profiles. Value Areas and POCPoint of Control, also known as the "fairest price to do business". It is the price level in the /ES where the greatest amount of volume in the prior RTH session traded. ShadowTrader measures the POC using volume but the traditional way is to mark off the widest point of the day's distribution where the most TPO's printed going across from left to right, indicating that that was the price where the most time was spent. It's important to pay attention to both the volume POC and the TPO POC. figures for /ESH7 and /NQH7 Futures are posted free every morning HERE. Click on any posts in the list on the left pane to see them in the main window. Don’t click on the ST logo as it will just refresh the page and you’ll get only the topmost post over and over. Click on the title or text.
I peeked at the S&P Futures last night around 7pm EST with the expectation that they would have moved a bit more than they had. Even now, at 8:35am EST, there is little movement as they are currently registering +1.25. Apparently the holiday torpor has not worn off as of yet and we could be in for another day of tight range.
Overnight inventoryA way of measuring overnight activity in the futures market by just noting how much of the overnight activity happens to fall above the prior day's settlement value (4:15pm EST close) and how much falls below. If more activity is above the settlement, then overnight inventory is said to be net long. If more is below, then it is said to be net short. If all of the overnight activity is above the settlement, then it is said to be 100% net long. If all of the activity is below the settlement then it is said to be 100% net short. The overnight inventory situation matters most and has the most impact on early trade when it is skewed 100% in either direction because when the imbalance is very large like that then the odds of an early correction increase greatly. This is due to the fact that most... is balanced and also trading in a tight range. Prior day’s highs and lows should always be looked at as balance point breakouts but note context. If we volume remains low then we may be in for more of the same which has been to simply establish new one-day balances at slightly higher or lower levels.
Recent days have untested TPO(MP) Stands for “Time Price Opportunity”. It is the smallest unit of measure displayed any market profile graphic, denoted by a single letter. Each TPO represents a point of time where the market being charted trades at a specific price. A single TPO is printed on the chart every time that a certain price is touched during any time period. Typically, the periods are set to 30 minutes. Therefore, every different letter that you see in the market profile distribution denotes a different 30 minute period. POC’s just above and below that are very prominent. Those would be 12/21 at 2264.75, and 12/23 at 2256.75. Both of these prices are close by and should be noted as targets for trades in either direction.
If there is to be more meaningful action today, you’ll know it by an expansion of range and see multiple day’s highs or lows start to get taken out. As the ranges have been small recently, this would not be difficult for the market to attain. Again, also in context which remains King.
Have a wonderful day,