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. value areas and ShadowTrader Pivots for /ESZ21 and /NQZ21 Futures are posted free every morning in the ShadowTrader Swing Trader newsletter.
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Pre market indications
| Opening In/Out Balance | in balance |
|---|---|
| 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... | balanced to net long |
| Current Price/Overnight Range | middle third |
| 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. | no |
| Potential for Early Trade | no |
| Short Term Bias | bearish, S&P close below 50sma daily |
Key Levels for Today
| 4571.75 | Top of SpikeA set of single prints that are created in the last 30 minute session of the day which form at the top or bottom of a range. |
|---|---|
| 4552.00 | 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. |
| 4513.75 | Settlement |
| 4497.75 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low / Bottom of SpikeA set of single prints that are created in the last 30 minute session of the day which form at the top or bottom of a range. |
| 4487.25 | Top of Gap |
| 4479.75 | Bottom of Gap |
| 4471.75 | 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. 10.18 / Weak O/N Low |
Ongoing Narrative / Commentary
Large spikeA set of single prints that are created in the last 30 minute session of the day which form at the top or bottom of a range. lower into yesterday’s close putting spike rulesA framework for analyzing a spike on the next trading day after it is formed.
Because the spike forms late in the day, it is impossible to gauge whether or not the higher or lower prices that have run quickly away from value will be deemed fair later. Thus we employ the spike rules in the next session.
Everything below is assuming a spike at the TOP of a daily range (reverse for a spike at the BOTTOM of a range)
-If prices open above the spike, that is considered bullish and tells us that prices didn't auction high enough in the spike to attract sellers and cut off buying activity. Monitor to see if there is acceptance above the spike.
-Prices opening within the spike confirm the higher prices of the spike. This tells us that the prices are fair enough for two sided... into play for this morning’s session. Thus far, all overnight activity is confined within the spikeA set of single prints that are created in the last 30 minute session of the day which form at the top or bottom of a range. which is the second most bearish outcome in the hierarchy of spike rulesA framework for analyzing a spike on the next trading day after it is formed.
Because the spike forms late in the day, it is impossible to gauge whether or not the higher or lower prices that have run quickly away from value will be deemed fair later. Thus we employ the spike rules in the next session.
Everything below is assuming a spike at the TOP of a daily range (reverse for a spike at the BOTTOM of a range)
-If prices open above the spike, that is considered bullish and tells us that prices didn't auction high enough in the spike to attract sellers and cut off buying activity. Monitor to see if there is acceptance above the spike.
-Prices opening within the spike confirm the higher prices of the spike. This tells us that the prices are fair enough for two sided.... The most bearish would be opening below the spikeA set of single prints that are created in the last 30 minute session of the day which form at the top or bottom of a range..
Yesterday’s spikeA set of single prints that are created in the last 30 minute session of the day which form at the top or bottom of a range. activity was especially noteworthy in that it closed a daily bar on the SPX and /ES well below the 50 sma daily. This is a very key moving average and a less weak market would have supported there longer than about the five minutes that it did. Carry this forward in your narrative as bearish.
Futures are coming into the session quite divergent which always adds an extra layer of complexity to day timeframe trade. /NQ’s are currently down about 40 with /ES’s up about 12. As always, pay close attention to this divergence when attempting day timeframe trade. Know which is the dominant faction before entering.
VPOC’s
- 11.22 4715.25
- 11.24 4698.50
- 10.18 4471.75
- 10.14 4428.50
- 10.13 4355.00
- 10.06 4310.00
Scenarios
- Spike rulesA framework for analyzing a spike on the next trading day after it is formed.
Because the spike forms late in the day, it is impossible to gauge whether or not the higher or lower prices that have run quickly away from value will be deemed fair later. Thus we employ the spike rules in the next session.
Everything below is assuming a spike at the TOP of a daily range (reverse for a spike at the BOTTOM of a range)
-If prices open above the spike, that is considered bullish and tells us that prices didn't auction high enough in the spike to attract sellers and cut off buying activity. Monitor to see if there is acceptance above the spike.
-Prices opening within the spike confirm the higher prices of the spike. This tells us that the prices are fair enough for two sided... are in play. 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 within the spikeA set of single prints that are created in the last 30 minute session of the day which form at the top or bottom of a range. is bearish as it confirms the emotional price exploration of late yesterday. That being said, traders were somewhat short in the holeA condition where late day sellers close price at or near lows but value and the volume POC remain much higher up in the RTH distribution. at yesterday’s close given how far away the settlement was from value and the 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.. While we are slated to open well below 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., there is still potential for some corrective activity early in the session. How much or if any at all will be very important M.G.I.Market Generated Information. - Moving below the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low on faster tempoProbably one of the most important and yet overlooked concepts in the market. The tempo is simply the ‘speed’ at which the market is moving. This is also referred to as confidence. Slow tempo is typical of range bound days where there is lots of responsive activity. Fast tempo occurs when there is initiating activity, and market is breaking out of a range. This is not to say that the market can’t have fast tempo on days when it is rotational or moving between the extremes of a value area. It certainly can. Effective intraday futures trading involves gauging the tempo and knowing that opportunities are fewer and smaller when the tempo is slow. See S.O.H. and bearish internalsInternals refers to “market internals” and is a blanket term to collectively describe the advance decline, breadth, tick and cumulative tick. puts the gap and next 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. (Key Levels) into play as targets. Monitor for continuation.
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