Peter’s Premarket Perspective | Tuesday, July 20, 2021

Peter Reznicek

The Market Profile 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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  Pre market indications
Opening In/Out Balance Out of Balance
Overnight Inventory 100% Net Long
Current Price/Overnight Range middle third
Shock and Awe yes
Potential for Early Trade yes
Short Term Bias /ES & /NQ below daily 20SMA
  Key Levels for Today
4314.25 Top of Gap

4272.00 Bottom of Gap
4254.00 POC / ONL / Settlement
4224.00 RTH 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 low 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 WWSHD moment which gives us some M.G.I. to work with.  Failing to cross the ONH 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 ONH tells me that short covering may be already on the wane.  The RTH session can be a very different animal from the overnight one, but those are the initial impressions.

Scenarios

  • Gap rules are in play for today’s session.  The overnight inventory 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 fade 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 RTH 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 low as well because it was a bounce from that 50sma daily.
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Peter Reznicek

Peter Reznicek is the founder of ShadowTrader.net and writer of Peter's Premarket Perspective, a morning market profile blog to help people plan their trading day and organize their thoughts before the market opens. He can be reached at asktheshadow@shadowtrader.net.

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