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| 3866.00 | 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. |
|---|---|
| 3849.00 | 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. |
| 3831.50 | Settlement |
| 3801.50 | 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. |
| 3799.00 | Top of Gap |
| 3777.00 | Bottom of Gap |
Small gap higher, obviously well inside range. 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 not 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 balanced to 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 buying. Example would be a broken wing butterfly. This spread is made up of two structures, one long vertical and one short vertical. In the BWB, the short vertical is wider than the long vertical. When you are long this spread, you are said to be in an options position that is "net short"
. As of now we are trading in the upper third of the overnight range.
After a large trending day lower, I like to note if 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. is lower than the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. session and by how much? Was there a lot of 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 overnight below the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. range or not? In last night’s case, not much. This doesn’t necessarily mean the selling is over, but rather tells us that the market is balancing at these lower prices for now. It also tells me that there is not outright panic out there right now or else we would be trading definitively lower.
Use the Key Levels wisely in today’s trade. Note that the highest one is 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.. 50% midpoints of any expanded range are important. They can often be turning points and are important lines in the same to tell us how strong or weak the short covering may be. Finding 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 today above 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. puts the bear case just a little bit into question.
On the downside, the large gap continue to yawn below us from roughly 3800 to 3777. On further weakness a full fill of this gap should be targeted.
Those of you who are fans of James Dalton (and I count myself in that camp) know that one of the bedrocks of 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 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. theory that he teaches is excess and balance. Keep that firmly in mind as you navigate today’s session. For now, futures markets are balancing at lower levels. As the day unfolds, constantly ask yourself the three questions1. What is the market doing? (This is the general tone and bias that is currently in play)
2. What is the market trying to do?
3. How good of a job is the market doing getting there? and note how the answers relate to the concepts of excess and balance.
Scenarios
- Use 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. as a potential go/no-go level for further short covering keeping firmly in mind that taking out an 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. that is inside of valueThis value has nothing to do with valuation. It denotes prices that are "fair". Fair in this sense means a price that is common to a lot of participants. An item that you buy once per week in a store at a price that doesn't fluctuate has a "fair price". You can express this by a formula Value = Price + Time or Value = Price + Volume Either of the above are valid ways of expressing value. In the first equation, value is defined by price staying the same for a long period of time. In the futures market, this would be an area that is revisted a lot during a particular session or multiple sessions. The point of control is the price level where the most amount of time was spent during an RTH session. James Dalton refers to this level as "the fairest price to do business". Using vo... More in the context of an expanded range lower is not the same as buying an 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. that 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 earlier (near the open) rather than later. More higher.
- Note that the settlement and 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 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. are close to each other in yesterday’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. distribution. Short plays can target this area as settlements and POC’s are often revisited.
- If you are a daily grind futures trader, then I’d be happy if you just take one thing from today’s report and that is simply that given where we are opening, the better futures trades will not present themselves close to the open but rather once things shake out a bit. The overnight range is compressed compared to the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. and we slated to open close to where the most valueThis value has nothing to do with valuation. It denotes prices that are "fair". Fair in this sense means a price that is common to a lot of participants. An item that you buy once per week in a store at a price that doesn't fluctuate has a "fair price". You can express this by a formula Value = Price + Time or Value = Price + Volume Either of the above are valid ways of expressing value. In the first equation, value is defined by price staying the same for a long period of time. In the futures market, this would be an area that is revisted a lot during a particular session or multiple sessions. The point of control is the price level where the most amount of time was spent during an RTH session. James Dalton refers to this level as "the fairest price to do business". Using vo... More in that RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. was.
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