The Market Profile value areas and ShadowTrader Pivots for /ESZ19 and /NQZ19 Futures are posted free every morning
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|3014.25||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 EST and 9:30am EST the next day.|
|3008.00||Balance Area High / RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. High|
|3015.50||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 remains "virgin" until it happens during a day session.|
In yesterday’s Premarket Perpsective, I focused on the four day balance and it’s end points above and below. Yesterday’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. activity was not able to breach either of those points, but overnight trade this morning has and we are currently trading just out of balance to the upside. Although the gap is small, it is 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 prior day's high or low, thus creating a true gap or space on the chart between one day and the next. Thus a true gap is one that has price opening completely outside of the prior day's range (either above the high or below the low) and anything else is just a gap that has far less import. As a gap is a "reordering of thinking", only a true gap really changes the tone and creates opportunity to trade early rather than later. and thus 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 right away. This means that if early trade doesn't start to correct the imbalance, then prices will probably move in the direction of the gap. 2. Larger gaps can often fail to fill on the first day or may fill only partially. 3. If the gap fills (meaning the prior day's RTH high is touched on a gap up or the prior day's RTH low is touched on a gap down) and value cannot get to at least overlapping, then the odds of a late day rally (on a gap up) or late day selloff (on a gap down) increase. 4. Gaps of larger than $20 in the /ES are difficult to trade and should be avoided early in the day as t... More are in play.
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 quite balanced this morning and that may bode well for bulls as there will be less imbalance to correct once the bell rings.
Today’s session will be all about whether or not we find acceptanceWhen the market profile begins to build out or develop in a certain area, it is said that the market is accepting those prices. This can be measured either in time spent or amount of volume that is transacted. It is generally understood that ShadowTrader defines acceptance as more of a time dynamic than a volume one. A good rule of thumb is to look for at least two TPO periods to print in the accepted area. The acceptance confirms that a significant amount of market participants are transacting at those levels. Acceptance is the opposite of rejection. More above the balance area or not. At this point, I believe the market should not reenter that area at all and hold above. I’ve noted the high of the balance area in the Key Levels above. Note that it is also almost identical to yesterday’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. high. This is the key downside reference for today’s trade.
Upside continuation today should target 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 EST and 9:30am EST the next day. first and if successful, look ahead to the 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 remains "virgin" until it happens during a day session. at 3015.50.
After five sessions of unchanged value, I believe it is extra imperative to watch where value develops today.
- Breaking out of a five day balance gives potential for a move higher today. I will focus on whether or not we can stay outside of the range in early trade and be biased to the long side if so. Note that any early upside trade will probably be within the context of the overnight range so location is key. An easier setup this morning would involve some minor corrective activity to test the upper bound of the balance area which could be used as excellent long trade location with a tight stop.
- While I think downside trade has less potential to happen this morning, I would consider it only on very negative internalsInternals refers to “market internals” and is a blanket term to collectively describe the advance decline, breadth, tick and cumulative tick. that take price back into range quickly and start to move and hold below settlement.
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