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| 3092.25 | 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. |
|---|---|
| 3083.00 | All Time High |
| 3081.25 | Overnight HalfbackA term for the halfway point between the high and low of any session, could be a day session or an overnight session. On Peter's market profile charts it is always a dark yellow horizontal line at that level. |
| 3077.00 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. High / Bottom of Gap |
Those of you who are members of my Weekly Options Advisory (or Scott’s Time Spreads Advisory) and are privy to my real-time What’s Peter Thinking audio and text messages know that this yet again gap should come as no surprise. I’ve been pointing out specifics that prove there are a lack of sellers in this market all week. Apparently this morning is no different as the trade war news pendulum has now swung in the other direction overnight gifting long traders with another double digit gap higher. This morning’s slated open represents 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 is also well above the prior overnight futures high. 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 definitely in play, indeed.
There is little to say on these mornings other than to go over my thought process on these larger gaps and what I look for which is always the same given this type of open. The first thing to note is if you are opening not only out of balance but out of the larger context of balance. In today’s case I would say yes to that as prices are higher than futures have ever been, even in that overnight session of 11/4.
The next thing I note is what is 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 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... situation. Usually on days like this we have 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... 100% net long but not always. A closer look at the overnight distribution of last night actually shows it to be more balanced as there is a good amount of activity both below and above the settlement. That bodes well for longs as there is less “shock and awe” to correct early and it may be easier for prices to stay high in the early session.
The last thing to consider in any large gap scenario is where your signposts are both above and below. What price would represent a full gap fill? What price would represent a partial gap fill? The answer to the first question is always the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. high/low. As for the second that can sometimes be a prior daily high in the vicinity or a half gap fill which is often common. That’s why I list the overnight halfbackA term for the halfway point between the high and low of any session, could be a day session or an overnight session. On Peter's market profile charts it is always a dark yellow horizontal line at that level. as a Key Level. On the upside it’s good to know where 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. is because it represents the highest point of the overnight distribution and the exact point where any traders who transacted have the absolute worst trade location. As you move down from that level, trade location improves slowly tickThe net cumulative tick reading on the NYSE or Nasdaq Composite. This is measured by the number of stocks ticking up minus the number of stocks ticking down at any given moment. It is the least used of the internal indicators but is discussed from time to time. Generally the tick readings are only helpful when they are at extremes such as +1000 on the NYSE to indicate that program trading is ensuing. by tickThe net cumulative tick reading on the NYSE or Nasdaq Composite. This is measured by the number of stocks ticking up minus the number of stocks ticking down at any given moment. It is the least used of the internal indicators but is discussed from time to time. Generally the tick readings are only helpful when they are at extremes such as +1000 on the NYSE to indicate that program trading is ensuing.. Let that sink in for a bit. Have you ever thought of markets that way? If so, why not? It’s true market generated information (M.G.I.Market Generated Information.) and has nothing to do with opinion or bias. Other players in the arena will act only according to their inventory position and location.
Scenarios
- As with any large 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., the potential for gap fill is there. This usually plays out by an early failure to take out 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. and a NYSE tickThe net cumulative tick reading on the NYSE or Nasdaq Composite. This is measured by the number of stocks ticking up minus the number of stocks ticking down at any given moment. It is the least used of the internal indicators but is discussed from time to time. Generally the tick readings are only helpful when they are at extremes such as +1000 on the NYSE to indicate that program trading is ensuing. that can get negative early and stay that way. If you don’t get that tickThe net cumulative tick reading on the NYSE or Nasdaq Composite. This is measured by the number of stocks ticking up minus the number of stocks ticking down at any given moment. It is the least used of the internal indicators but is discussed from time to time. Generally the tick readings are only helpful when they are at extremes such as +1000 on the NYSE to indicate that program trading is ensuing. signal, the odds of a fill decrease. Note that there are a few signposts of prior highs in the way of that down move and also that we are in an open territory where there are fewer sellers.
- A strong (read: pullbacks are buyable) market will have a positive NYSE tickThe net cumulative tick reading on the NYSE or Nasdaq Composite. This is measured by the number of stocks ticking up minus the number of stocks ticking down at any given moment. It is the least used of the internal indicators but is discussed from time to time. Generally the tick readings are only helpful when they are at extremes such as +1000 on the NYSE to indicate that program trading is ensuing. for the first 30 minutes at least and will not fill very much of the gap at all, instead digesting the overnight gain. Refer to 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 #2 and #4!
ShadowTrader Cumulative Tick
Beef up your "quad" and by putting your tickThe net cumulative tick reading on the NYSE or Nasdaq Composite. This is measured by the number of stocks ticking up minus the number of stocks ticking down at any given moment. It is the least used of the internal indicators but is discussed from time to time. Generally the tick readings are only helpful when they are at extremes such as +1000 on the NYSE to indicate that program trading is ensuing. indicator on steroids!
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