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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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... | 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 / market on track to retest Feb lows |
Key Levels for Today
| 4217.25 | 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. / 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. Area |
|---|---|
| 4182.75 | 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. |
| 4145.25 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low / Base 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. |
| 4136.75 | 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. |
Ongoing Narrative / Commentary
Sellers returned in full force yesterday taking the /ES down to a key trendline which you can see in the graphic below this commentary. InternalsInternals refers to “market internals” and is a blanket term to collectively describe the advance decline, breadth, tick and cumulative tick. were bearish and all context was confirming.
Today could easily be a bit more balanced with two sided activity as yesterday had a good deal of trend to it. The overnight range is large and although 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 close to 100% net long, we are opening within range which will bring on better opportunities (read: higher odds of success) later rather than earlier in the session.
Yesterday’s late session activity ended on a 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 puts 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. As of now we are trading with one of the more bullish outcomes of 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 to open above it. Should there be 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. in today’s session, that is decidedly less bullish and confirms the lower prices of 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 RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. action took the /ES down to a nd through a key trendline on it’s daily. I can’t stress enough how this is where things get a little tricky when the market is in the “last mile” so to speak. By that I mean the last little piece of distance to the February low which would complete the 100% retracement or “round trip” as I like to call it. These levels are often more difficult than you’d think to resolve and once tested, there is almost always a strong bounce as it’s difficult for prices to go 100% of a prior move and then continue through that area immediately. Every market is different but I am simply speaking from experience.
VPOC’s
- 04.21 4390.00
Scenarios
- 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 close to 100% net long but we are very far off of 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. and slated to open within value. Overnight activity thus far is balancing off some of yesterday’s selling and this dynamic could easily continue into the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. session as it often does. Let things settle out a bit before getting active in the day timeframe.
- 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. Holding above the Top of 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 short term bullish and may attract short covering. Be well aware that any such activity is against the backdrop of the value areaA range where approximately 70% of the prior days volume traded. The range is derived from one standard deviation on either side of the mean which is roughly 70%. See: Market Profile and also the overnight range, both of which may act as a headwind. - 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 more bearish and confirms the lower prices of 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.. Watch where value develops during the session in relation to this area.
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