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 /ESM22 and /NQM22 Futures are posted free every morning in the ShadowTrader Swing Trader newsletter.
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| 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 |
| Current Price/Overnight Range | lower 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 | primary downtrend broken |
| 4515.00 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. High / 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. |
|---|---|
| 4486.00 | Top of Single PrintsAny section of the market profile distribution that is only one TPO wide. Single prints are a sign of emotional buying or selling as very little time was spent at those levels and thus there is no value there. The endpoints of single print sections are considered to be potential support or resistance points. |
| 4467.50 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low |
| 4440.50 | 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. 3.21 |
Ongoing Narrative / Commentary
We come into this session slightly down 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. lower after five sessions of one time framingA trending situation where in an uptrend the low of the previous TPO period is not broken by two ticks or more. In a downtrend it would be reversed and the high of any previous TPO period is not broken by two ticks or more. on the daily chart. That is a dynamic to carry forward as it is generally unsustainable for so many sessions.
Corrective activity has been extremely minimal in this advance and the overnight activity thus far is no exception. There has simply been no price exploration below any prior day’s low, hence the one time framingA trending situation where in an uptrend the low of the previous TPO period is not broken by two ticks or more. In a downtrend it would be reversed and the high of any previous TPO period is not broken by two ticks or more. on the daily.
Yesterday’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. distribution has a relatively prominent TPO(MP) Stands for “Time Price Opportunity”. It is the smallest unit of measure displayed any market profile graphic, denoted by a single letter. Each TPO represents a point of time where the market being charted trades at a specific price. A single TPO is printed on the chart every time that a certain price is touched during any time period. Typically, the periods are set to 30 minutes. Therefore, every different letter that you see in the market profile distribution denotes a different 30 minute period. 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. which gives us two pieces of valuable M.G.I. The first is that on any rally today, the market will want to target this level. The second is that a lot of two sided trade took place yesterday which tells us that buyers may be running out of steam in the short term. Potential is certainly there for at least a liquidation breakA sharp downward break in price that often seems to come out of nowhere and is usually short lived. It is caused primarily by short term traders inventory position getting overly long and initiated by those most recent longs who have the poorest trade location. that would clear out some of the poorer location longs.
I am noting that 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. came right to the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. High (short by two ticks) and am carrying it forward in my narrative as a further breakout level at some point. Given the context, I would not attempt that trade today but rather after some balance or correction.
- 03.21 4440.50
- 03.15 4219.50
- 03.14 4163.50
Scenarios
- After five sessions of one time framingA trending situation where in an uptrend the low of the previous TPO period is not broken by two ticks or more. In a downtrend it would be reversed and the high of any previous TPO period is not broken by two ticks or more. on the daily, location is poor for new longs that are trading longer than the day timeframe. Potential is there for a liquidation breakA sharp downward break in price that often seems to come out of nowhere and is usually short lived. It is caused primarily by short term traders inventory position getting overly long and initiated by those most recent longs who have the poorest trade location. with the big question being whether or not it will take out the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low or not. If so, the first 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. below us (4440.50) would be in play.
- Never forget door number three. While current context is short term overbought, the market doesn’t have to liquidate or do anything. Correction by time and not price is correction just the same.
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