Peter’s Premarket Perspective
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What is Market Profile
Developed by J. Peter Steidlmayer in 1980 and refined by James Dalton through the groundbreaking text “Mind Over Markets”, market profile is simply a way of organizing market generated information by incorporating the “3rd element” of time in addition to price and volume. Normal, two-dimensional charts are just that, two dimensional. They only show you how high or low price has gone and how much volume traded during each bar. Market profile tells us this as well but also keeps track of how much time was spent at each specific price level, thereby giving us a much better indication of where traders deem prices to be fair versus unfair. This creates enormous opportunities for the educated trader who knows how to read market profile.
Traders Who Don’t Start Their Day With Premarket Perspective Vs Traders Who Do
- Don’t understand the difference between price and value, therefore make decisions out of fear because of fast moving prices
- End up making trading decisions solely on guesswork and feel a.k.a GAMBLING, a surefire way to lose all your money
- Are constantly confused and always asking “what is this market doing”
- Make foolish decisions by starting to trade right after the bell everyday
- Run after tiny profits while suffering large losses that wipe out many days of gains
- Stay on the top of their game by being aware of the difference between price vs value
- Are prepared to make money with daily insights and all the key levels marked off on their charts for a successful day
- Know when to go for bigger gains rather than scalp for small moves because the odds favor it
- Are skilled at reading overnight action & will recognize opportunity when everyone else is anxious
- Trade less often and with more precision and with a framework that gets them the gains they desire
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Peter’s Premarket Perspective | Friday, January 15, 2021
The Market Profile value areas and ShadowTrader Pivots for /ESH21 and /NQH21 Futures are posted free every morning
in the ShadowTrader Swing Trader newsletter.
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Futures a bit divergent on a small gap down this morning possibly on the heels of bank earnings and digestion of President Elect Biden’s unveiling of economic stimulus package yesterday evening. Both sides currently underwater but earlier action saw S&P’s down by about 17 while Nasdaq 100’s positive by 5.
As of now we are opening out of range on a true gap lower. While that does put gap rules into play, we are well off of the ONH and also not outside of the larger balance area. Overnight inventory is close to 100% net short and we are currently ticking in the mid to lower third of the overnight range.
The lowest Key Level listed above is the ONL which also corresponds closely with the 1.7 RTH Low. It could be argued that this RTH Low is the low end of the balance area as value has been tracking relatively unchanged from the value area of that day for five subsequent sessions. As such it is a potential downside break out level.
On the upside we will look at the usual signposts should there be a counter trend rally to the overnight trade. Look for futures to test the RTH Low first and monitor for continuation from there to the usual markers such as VAL, etc.
Today is the last trading day before a 3 day weekend due to the federal holiday on Monday. As such we may see volume taper a bit in later trade. That generally leads to unexpected breaks in either direction. Along the same lines, divergence between the /ES and /NQ also makes things slightly harder to navigate. Use context wisely to determine which side has the upper hand before trading in the day timeframe today.
Scenarios
-
- With six sessions of balance now potential continues for a larger break in either direction. A discussed above, the ONH/ 1.7 Low area could trigger overhead supply. If so, target that VPOC of 1.6 at 3740.00.
- Although not fully in a shock and awe open, overnight inventory could lead to an opening imbalance correction upwards.
If so, look to the RTH Low as a potential target and monitor for continuation. The early trade today will be decided by whether this inventory will correct or not. Given that we are well off of the ONL already and still within range, such a fade is by no means a slam dunk.
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Peter’s Premarket Perspective | Thursday, January 14, 2021
The Market Profile value areas and ShadowTrader Pivots for /ESH21 and /NQH21 Futures are posted free every morning
in the ShadowTrader Swing Trader newsletter.
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| 3824.50 | ONH / New ATH |
|---|---|
| 3817.75 | ONH |
| 3806.00 | POC / Settlement |
| 3804.25 | ONL (45 degree line) |
Overnight activity is very compressed with little range to show for an entire evening’s work by the Globex crowd. As of now we are still trading within the prior day’s range and also within the larger balance area that we discussed yesterday. Continue to carry that forward in your narrative. Overnight inventory is close to 100% net long and we are currently trading in the middle to lower third of the overnight range.
The overnight distribution has a 45 degree line from it’s lows. As always, less import than seeing the same pattern in an RTH session but worth noting nonetheless. Assume the ONL could be secure in today’s trade.
Overall, there continues to be little to say as the market remains within balance. Balance rules continue to be in play for this larger multiday range. Value has been little changed over the last five RTH sessions.
The second scenario is left over from yesterday’s PPP by design as it’s still as relevant as yesterday.
Scenarios
-
- There is some potential that the ONL remains secure in today’s session due to the overnight pattern. I would bias long unless that ONL is taken out. I am keeping firmly in mind that for now overnight traders were not able to get any major upside breakout going and the session has been relatively muted
- Assume further balance while we remain within the balance area. Balance rules are in play. Go with any breakout from balance that has corresponding context of internals and tempo. Price action remaining within balance should be treated as responsive trade only.
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Peter’s Premarket Perspective | Wednesday, January 13, 2021
The Market Profile value areas and ShadowTrader Pivots for /ESH21 and /NQH21 Futures are posted free every morning
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I could easily just have left yesterday’s commentary untouched and that would have been ok today. Absolutely no change yesterday as value was almost identical to the prior session. The balance area continues to get larger which should increase the size of the break when it comes.
Balance rules are in play and as such the Key Levels above are few by design. Think about all price action today in the context of the balance rules. Any activity within the balance area is responsive and the market telling us that it is waiting for more information before establishing value elsewhere.
Overnight inventory is very balanced and current prices on a small gap lower are trading in the middle to lower third of the overnight range. This M.G.I. has far less import than it would if we were opening out of range. Obviously, again a day to trade later rather than earlier.
Scenarios
-
- Assume further balance while we remain within the balance area. Balance rules are in play. Go with any breakout from balance that has corresponding context of internals and tempo. Price action remaining within balance should be treated as responsive trade only.
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$20 Buy NowPeter’s Premarket Perspective | Tuesday, January 12, 2021
The Market Profile value areas and ShadowTrader Pivots for /ESH21 and /NQH21 Futures are posted free every morning
in the ShadowTrader Swing Trader newsletter.
WindoTrader 702-800-4628 Speak with Terry about the ShadowTrader discount
Second session in a row where we have all overnight activity inside of the RTH range. Market is in balance with value relatively unchanged for three sessions. Overnight inventory is also quite balanced and we are currently trading in the middle third of the overnight range. All of that obviously points to higher odds opportunities presenting themselves later in the session rather than earlier.
Consider the last three RTH sessions to be a balance area. Apply balance rules to that range.
Liquidation breaks continue to be rebuffed. The market is continuing to balance off the most recent rally. I continue to carry forward that there is an ATH in an overnight session that is potentially unsecure.
Scenarios
-
- The usual way to look at balanced overnight inventory that is inside of the prior day’s range is to assume that said balance has potential to continue into the the day session. That being the case, expect responsive trade while we remain within range and use the extremes of both yesterday’s range and the larger balance area as go/no-go levels for larger initiative moves.
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Peter’s Premarket Perspective | Monday, January 11, 2021
The Market Profile value areas and ShadowTrader Pivots for /ESH21 and /NQH21 Futures are posted free every morning
in the ShadowTrader Swing Trader newsletter.
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Solid gap lower of about 27 handles as I go to press here. For now still within range so not a true gap and gap rules are not in play. That’s important to note as many think that they automatically are when gaps are large. Overnight inventory is 100% net short and we are currently trading very close to the ONL.
In using market profile to organize M.G.I., it is important to understand that there are longer term signals that we enter into an ongoing narrative and there are shorter term signals that we use to help us discern where the potential is for movement on that particular day. Let’s start with the longer term narrative…
-The overnight session coming into today made a new all time high in that overnight session. That is a carry forward as a high that is potentially unsecure.
-Value has been clearly higher for three sessions, however two of those sessions were back to back “p” formation distributions indicative of early short covering and emotional buying.
The above tells us a lot about the state the market right now. In a nutshell, things are bullish, they should go higher, and it’s important to always keep in mind now we got here.
On a more granular level, we have overnight inventory 100% net short however within range. While we are not on a true gap lower, we should still come into the open thinking that if new money sellers don’t emerge quickly, then the potential for strong short covering is there. Note from the overnight distribution that the bulk of it is within the value area which is a sign of acceptance of the higher prices from Friday’s RTH session. I am also noting that Friday’s close was at the very top of the RTH range at the end of a small spike and away from the volume POC and value area. Thus some of the overnight selling has to be attributed to the simple fact of buyers closing the market a bit ahead of themselves.
Scenarios
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- As discussed above, there is potential for early short covering given the overnight inventory situation. Judge the open on how much of that if any occurs.
- Should there be a fade higher, monitor for continuation using the usual signposts as targets starting with VAL and moving higher from there.
- A sell signal will occur if there is an opening drive lower that cannot recover or if there is an early fade that stalls and returns back to the open. In such a scenario, a short can be taken at the opening print with a stop over HOD. Monitor for continuation with an ultimate target at the VPOC of 1.6
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$49 per monthPeter’s Premarket Perspective | Tuesday, December 29, 2020
The Market Profile value areas and ShadowTrader Pivots for /ESH21 and /NQH21 Futures are posted free every morning
in the ShadowTrader Swing Trader newsletter.
WindoTrader 702-800-4628 Speak with Terry about the ShadowTrader discount
| 3747.75 | ONH / ATH |
|---|---|
| 3738.50 | Overnight Halfback |
| 3732.25 | RTH High |
| 3727.00 | TPO POC (Prominent) |
Today is a good session to look at the ongoing narrative which can offer us clues as to how the RTH session will play out. Overnight inventory is 100% net long. Yesterday’s overnight inventory was skewed very net long as well and the gap fill was minimal in relation to the gap. This increases the odds that we get a gap fill today. Watch the Overnight Halfback closely in early trade to see if it can be crossed which may signal the full fill to the RTH High. Yesterday’s TPO POC was prominent and could also be in play on further weakness.
The overnight session has notched yet another all time high and this should be carried forward in our narrative as well. Overnight ATH’s have longer odds of holding as the high of the move than RTH ones.
Value broke away cleanly from a prior multi day balance area. This is also noteworthy and a carry forward. Regardless of how the RTH session plays out, keep in mind that value unchanged to higher supports the continuation of this move. At this juncture, I would say that only value developing well below the RTH Low and inside of the large gap would have any potential to change the narrative.
The gap is a true gap and gap rules are in play.
Scenarios
-
- The first scenario is essentially laid out in the first paragraph above. While odds of a gap fill are increased, don’t get wedded to that and think that it HAS to happen that way. Not getting one or again being muted gives us a lot of M.G.I. about how weak sellers are currently. Remember gap rules #2 and #4.
- Any continuation play today (gap and go) may be signaled by a failure to move below Overnight Halfback. Monitor for continuation closely and make sure that internals are strong and holding without deterioration. It will help if both /ES and /NQ are firmly in sync.
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Save 15% nowPeter’s Premarket Perspective | Tuesday, November 3, 2020
The Market Profile value areas and ShadowTrader Pivots for /ESZ20 and /NQZ20 Futures are posted free every morning
in the ShadowTrader Swing Trader newsletter.
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| 3376.25 | Top of Gap |
|---|---|
| 3349.75 | ONH |
| 3333.75 | Bottom of Gap |
| 3323.50 | RTH High |
| 3299.25 | Settlement / ONL |
Solid true gap higher on this election day. Gap rules are in play.
Overnight inventory is 100% net long and as of now we are slated to open in the upper third of the overnight range.
There is a large unfilled gap above yesterday’s range into which overnight activity has ventured forth. This is simply a carry forward to know that we are opening inside of a gap. Only RTH activity counts towards actually repairing this structure.
If there is any early fade, the bottom of the gap could be a support point where stronger buyers emerge. Keep that in mind as a Key Level today.
While it’s a long way away from current price, I must mention that yesterday’s RTH Low is one to carry forward into your narrative. The low was both poor and weak. It is a poor low due to lack of excess and it is a weak low because it stopped dead on the prior RTH session’s settlement. Mark it off on your charts as it will be a good short should it ever be tested again.
As this is the last RTH session before the election, expect some craziness as players jockey for position ahead of the results. Very difficult to say how futures will react this evening, so comport yourselves accordingly.
Scenarios
- Gap rules are in play. As such, the first scenario is always the potential fade. Overnight inventory is 100% net long and we are well out of range so the setup is there. Look for early failure to take out the ONH and/or crosses back below the open after any opening drive higher. Monitor for continuation and consider the Bottom of the Gap as potential support.
- The upside gap should fill at some point and that could be today. If this is the scenario, then the ONH will get taken on strong tempo and bullish internals and traders should monitor for continuation.
- Anything more playable to the downside would be presaged by a failure to hold above the Bottom of the Gap and subsequent full gap fill that then finds acceptance within yesterday’s RTH range.
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