Peter’s Premarket Perspective
You CAN Understand the Futures Market! STOP Guessing!
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No more “shock and awe”
Do you often wake up to large gaps and then either panic out of your current
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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
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|---|---|
✔ Don’t understand the difference between price and value, therefore make decisions out of fear because of fast moving prices |
✔ Stay on the top of their game by being aware of the difference between price vs value
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✔ End up making trading decisions solely on guesswork and feel a.k.a GAMBLING, a surefire way to lose all your money |
✔ Are prepared to make money with daily insights and all the key levels marked off on their charts for a successful day |
✔ Are constantly confused and always asking “what is this market doing” |
✔ Know when to go for bigger gains rather than scalp for small moves because the odds favor it |
✔ Make foolish decisions by starting to trade right after the bell everyday |
✔ Are skilled at reading overnight action & will recognize opportunity when everyone else is anxious |
✔ Run after tiny profits while suffering large losses that wipe out many days of gains |
✔ 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 | Tuesday, July 20, 2021
The 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 volum… value areas and ShadowTrader Pivots for /ESU21 and /NQU21 Futures are posted free every morning in the ShadowTrader Swing Trader newsletter.
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Click HERE for a market profile key that will help you interpret the chart above.
| Opening In/Out Balance | Out of Balance |
|---|---|
| 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 fal… | 100% Net Long |
| Current Price/Overnight Range | middle third |
| Shock and AweA term Peter uses to describe what overnight futures traders may be feeling when faced with an open that is wildly divergent from what they expected. Large gaps in either direction that are opening we… | yes |
| Potential for Early Trade | yes |
| Short Term Bias | /ES & /NQ below daily 20SMA |
| 4314.25 | Top of Gap |
|---|---|
| 4272.00 | Bottom of Gap |
| 4254.00 | 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 … / ONLOvernight Low. A term mostly used for the futures market as it trades almost around the clock. To be precise, in the /ES this would be the lowest price between 4:30pm EST and 9:30am EST the next day. / Settlement |
| 4224.00 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low (Poor) |
Ongoing Narrative / Commentary
Yesterday, I mentioned to shift your focus slightly to the “bigger picture” items that everyone can see. That turned out to be prescient as yesterday’s low in the SPX cash was right to the 50SMA daily where a poor lowA poor low is one which lacks excess and is the opposite of an excess low. A poor low will have less than two TPO’s of excess at the bottom of a daily range with at least 2-3 columns of TPO’s lining u… was formed and short covering ensued. This morning’s solid gap higher has buyers building on that low.
Pulling back to a wider view shows us that there is still a very large unfilled gap above us from yesterday. Opening prices are going to start the day within that gap. The market doesn’t like gaps and gaps should fill. If they don’t, we have a WWSHDWhen What Should Happen Doesn’t – A market dynamic where prices defy what is normally expected of them given the specific context they are in. A good example would be filling a larger gap only partial… moment which gives us some M.G.I.Market Generated Information. to work with. Failing to cross the ONHOvernight High. A term mostly used in describing the futures market which has an overnight session and trades almost around the clock. To be precise, in the /ES this is the high made between 4:30pm ES… today would be a sign of weakness.
Given the size of the gap above us and the fact that overnight activity filled very little of it, and we are currently well off of the ONHOvernight High. A term mostly used in describing the futures market which has an overnight session and trades almost around the clock. To be precise, in the /ES this is the high made between 4:30pm ES… tells me that short covering may be already on the wane. The RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. session can be a very different animal from the overnight one, but those are the initial impressions.
Scenarios
- Gap rulesGuidelines to follow on any day that the futures open outside of the prior day’s RTH range. Only opening outside of range is a true gap and puts gap rules in play. 1. Go with all gaps that don’t fill … are in play for today’s session. The 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 fal… is 100% net long so we know what should happen in early trade which would be the corrective move. Early trade will tell us a lot about the nature of the short covering in the overnight session. A lack of early fadeWhen a stock moves opposite the direction of its gap on an intraday basis will mean that buyers are not done and we should bias long, monitoring for continuation as we go.
- Note that the ONL and settlement are almost identical. That means that once all overnight longs are relegated to the “wrong” column, screens will go red around the world as well. I would bias short below that level. The RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low was poor yesterday and should be carried forward as well for a potential further short trigger as it needs to be repaired. An argument could be made that it is a weak lowA weak low should not be confused with a poor low. The latter speaks to a deficiency in structure and the former deals with the location of the low. A weak low is formed when a market falls and revers… as well because it was a bounce from that 50sma daily.
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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
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| 3797.75 | ONHOvernight High. A term mostly used in describing the futures market which has an overnight session and trades almost around the clock. To be precise, in the /ES this is the high made between 4:30pm ES... / VALValue Area Low |
|---|---|
| 3792.25 | Settlement |
| 3786.25 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low |
| 3763.75 | 1.7 RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low / ONHOvernight High. A term mostly used in describing the futures market which has an overnight session and trades almost around the clock. To be precise, in the /ES this is the high made between 4:30pm ES... |
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 gapThere is a lot of discussion as to what constitutes a gap. Is it measured to the prior day's close, or to the prior day's high or low. Here at ShadowTrader we believe that it is always and only to a p... lower. While that does put gap rulesGuidelines to follow on any day that the futures open outside of the prior day's RTH range. Only opening outside of range is a true gap and puts gap rules in play. 1. Go with all gaps that don't fill ... into play, we are well off of the ONHOvernight High. A term mostly used in describing the futures market which has an overnight session and trades almost around the clock. To be precise, in the /ES this is the high made between 4:30pm ES... and also not outside of the larger balance area. 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 fal... is close to 100% net shortThe concept of being more short than long in an options spread by creating options spreads where you are selling more structures than you are buying or selling wider structures than the ones you are b... and we are currently ticking in the mid to lower third of the overnight range.
The lowest Key Level listed above is the ONLOvernight Low. A term mostly used for the futures market as it trades almost around the clock. To be precise, in the /ES this would be the lowest price between 4:30pm EST and 9:30am EST the next day. which also corresponds closely with the 1.7 RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low. It could be argued that this RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low is the low end of the balance area as value has been tracking relatively unchanged from the value areaA range where approximately 70% of the prior days volume traded. The range is derived from one standard deviation on either side of the mean which is roughly 70%. See: Market Profile 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 RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low first and monitor for continuation from there to the usual markers such as VALValue Area Low, 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
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- With six sessions of balance now potential continues for a larger break in either direction. A discussed above, the ONHOvernight High. A term mostly used in describing the futures market which has an overnight session and trades almost around the clock. To be precise, in the /ES this is the high made between 4:30pm ES.../ 1.7 Low area could trigger overhead supply. If so, target that VPOCVirgin Point of Control. This is a point of control level that has not yet been tested (traded through) during an RTH session. If the POC gets tested during an overnight session, it does not count and... of 1.6 at 3740.00.
- Although not fully in a shock and aweA term Peter uses to describe what overnight futures traders may be feeling when faced with an open that is wildly divergent from what they expected. Large gaps in either direction that are opening we... open, 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 fal... could lead to an opening imbalance correction upwards.
If so, look to the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. 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 ONLOvernight Low. A term mostly used for the futures market as it trades almost around the clock. To be precise, in the /ES this would be the lowest price between 4:30pm EST and 9:30am EST the next day. already and still within range, such a fadeWhen a stock moves opposite the direction of its gap on an intraday basis 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
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| 3824.50 | ONHOvernight High. A term mostly used in describing the futures market which has an overnight session and trades almost around the clock. To be precise, in the /ES this is the high made between 4:30pm ES... / New ATHAll Time High |
|---|---|
| 3817.75 | ONHOvernight High. A term mostly used in describing the futures market which has an overnight session and trades almost around the clock. To be precise, in the /ES this is the high made between 4:30pm ES... |
| 3806.00 | 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 ... / Settlement |
| 3804.25 | ONLOvernight Low. A term mostly used for the futures market as it trades almost around the clock. To be precise, in the /ES this would be the lowest price between 4:30pm EST and 9:30am EST the next day. (45 degree lineThe 45 degree line is an interesting market profile nuance. It occurs when a 45 degree line can be drawn from the lowest point of a distribution to its widest point (TPO POC). This is a sign that sell...) |
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 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 fal... 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 lineThe 45 degree line is an interesting market profile nuance. It occurs when a 45 degree line can be drawn from the lowest point of a distribution to its widest point (TPO POC). This is a sign that sell... from it’s lows. As always, less import than seeing the same pattern in an RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. session but worth noting nonetheless. Assume the ONLOvernight Low. A term mostly used for the futures market as it trades almost around the clock. To be precise, in the /ES this would be the lowest price between 4:30pm EST and 9:30am EST the next day. could be secure in today’s trade.
Overall, there continues to be little to say as the market remains within balance. Balance rulesWhen a market is in balance, meaning that it is consolidating in a tight range of two or more days, then balance rules apply. The balance rules are nothing more than a framework of scenarios that coul... continue to be in play for this larger multiday range. Value has been little changed over the last five RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. 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 ONLOvernight Low. A term mostly used for the futures market as it trades almost around the clock. To be precise, in the /ES this would be the lowest price between 4:30pm EST and 9:30am EST the next day. remains secure in today’s session due to the overnight pattern. I would bias long unless that ONLOvernight Low. A term mostly used for the futures market as it trades almost around the clock. To be precise, in the /ES this would be the lowest price between 4:30pm EST and 9:30am EST the next day. 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 rulesWhen a market is in balance, meaning that it is consolidating in a tight range of two or more days, then balance rules apply. The balance rules are nothing more than a framework of scenarios that coul... are in play. Go with any breakout from balance that has corresponding context of internalsInternals refers to “market internals” and is a blanket term to collectively describe the advance decline, breadth, tick and cumulative tick. and tempoProbably one of the most important and yet overlooked concepts in the market. The tempo is simply the ‘speed’ at which the market is moving. This is also referred to as confidence. Slow tempo is t.... Price action remaining within balance should be treated as responsive tradeA responsive trade is a counter-trend trade taken against a specific level. The theory is that when two sided trade is taking place, there will not be enough momentum to push past key levels and buyer... 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
in the ShadowTrader Swing Trader newsletter.
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| 3824.50 | ONHOvernight High. A term mostly used in describing the futures market which has an overnight session and trades almost around the clock. To be precise, in the /ES this is the high made between 4:30pm ES... / New ATHAll Time High |
|---|---|
| 3794.50 | 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 mar... & Volume 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 ... (2 sessions) |
| 3768.00 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low |
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 rulesWhen a market is in balance, meaning that it is consolidating in a tight range of two or more days, then balance rules apply. The balance rules are nothing more than a framework of scenarios that coul... 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 rulesWhen a market is in balance, meaning that it is consolidating in a tight range of two or more days, then balance rules apply. The balance rules are nothing more than a framework of scenarios that coul.... 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 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 fal... 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.Market Generated Information. 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 rulesWhen a market is in balance, meaning that it is consolidating in a tight range of two or more days, then balance rules apply. The balance rules are nothing more than a framework of scenarios that coul... are in play. Go with any breakout from balance that has corresponding context of internalsInternals refers to “market internals” and is a blanket term to collectively describe the advance decline, breadth, tick and cumulative tick. and tempoProbably one of the most important and yet overlooked concepts in the market. The tempo is simply the ‘speed’ at which the market is moving. This is also referred to as confidence. Slow tempo is t.... Price action remaining within balance should be treated as responsive tradeA responsive trade is a counter-trend trade taken against a specific level. The theory is that when two sided trade is taking place, there will not be enough momentum to push past key levels and buyer... 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
| 3824.50 | ONHOvernight High. A term mostly used in describing the futures market which has an overnight session and trades almost around the clock. To be precise, in the /ES this is the high made between 4:30pm ES... / New ATHAll Time High |
|---|---|
| 3810.50 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. High |
| 3781.00 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low |
Second session in a row where we have all overnight activity inside of the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. range. Market is in balance with value relatively unchanged for three sessions. 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 fal... 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 RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. sessions to be a balance area. Apply balance rulesWhen a market is in balance, meaning that it is consolidating in a tight range of two or more days, then balance rules apply. The balance rules are nothing more than a framework of scenarios that coul... 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 ATHAll Time High in an overnight session that is potentially unsecure.
Scenarios
-
- The usual way to look at balanced 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 fal... 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 tradeA responsive trade is a counter-trend trade taken against a specific level. The theory is that when two sided trade is taking place, there will not be enough momentum to push past key levels and buyer... 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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