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|3782.50||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 EST and 9:30am EST the next day. / 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.|
|3720.25||RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low|
|3708.75||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. 1.29|
Futures currently mixed after a stellar NFP number showing an increase of 379,000 versus consensus of 175,000. That means economy heating up which means more inflation which explains the $TNX leaping from 1.556 to 1.626 as soon as that news crossed, which means /NQ futures down 45 and /ES up 4, which means growth tech doesn’t like it, while banks/financials do. That is what is going on in a nutshell.
The bigger question is how we trade this. Firstly, expect that the overnight divergence carries into the day session. It’ almost always like that so I won’t assume any different. Next I ask myself the three premarket questions1. Are we opening in or out of balance. This is defined by both the prior day's RTH range and any larger recent balance area should it exist.
2. Is overnight inventory net long or net short and by how much?
3. Where in relation to the entire overnight range are futures trading currently?
which tell me that the market is opening within range and that 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 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"
(not 100%), and that we are currently trading right at 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.. All of that gives me a good amount of M.G.I.Market Generated Information. already. Now as I write this I see that the futures situation that I mentioned before has changed dramatically and now /NQ’s are very positive as well although still up only half as much as /ES’s. /ES is now also up so much that it has crossed 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.. All of it is solid M.G.I.Market Generated Information. which tells me that the market is maybe putting more weight on the reflation/reopening trade than it is on higher borrowing costs. I’ll carry that forward too.
The overall framework to work from has to be that overall inventory (not just overnight but RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. sessions as well) is 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"
and the majority of players are probably expecting further weakness. Thus, even though we are not going to open outside of range, I have to think that there is a bit of 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 well outside of range are examples of this. The approach is that when the market opens in such a manner, there is often opportunity to trade earlier rather than later because of the large contingent of traders who will be forced to reverse their positions quickly. to this open. That being said, it will still be an open within range on a non 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.. Always better to trade those later rather than earlier.
- The reaction to the NFP’s may have more than a few shorts concerned at the open. I would use the same parameters as yesterday as far as trading the open. (See yesterday’s Scenarios.)
- Yesterday’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. session represented a break out from balance downward. I am seeing the low end of that balance at around the 3805 area as shown in 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. graphic above. 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 this area puts yesterday’s breakout into question and has potential to change the tone considerably should more buyers join.
- If the open is faded and there is no further advance into the balance area which would more than likely make value unchanged then that signals status quo and seller are still in control.
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