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 | bearish / market on track to retest Feb lows |
| 4158.50 | 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. |
|---|---|
| 4119.00 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low / VALValue Area Low |
| 4111.50 | 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. |
| 4094.25 | Feb 24 Swing Low |
Ongoing Narrative / Commentary
Strong selling to cap off a very bearish month in the /ES with a close near the lows to boot. Not much follow through on the first trading day of a new month and a week that will bring us our first substantial rate hike from the FOMC.
While the /NQ is well below the Feb lows, the /ES is still holding slightly above. This dynamic should continue to be a part of your narrative. I have seen this many times before where new shorts will short the swing low only to find that the /NQ is so oversold at that point that it catches a bit, resulting in a false break through the low in the /ES. This is just one scenario, but keep it in mind. Location for new shorts is not the greatest right here. That doesn’t mean that the market cannot move lower, it is just a fact.
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 very balanced coming into today’s session coupled with the distinct lack of follow through to Friday’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. activity. The 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. is only a couple points below the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low. While the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. session can often be a different animal from the overnight one, for now it seems that sellers may be painting themselves into a corner. Either that, or we should consider the overnight session as needed balance to the trend (read: excess) that occurred on Friday.
- 04.21 4390.00
Scenarios
- With the futures trading just outside of range, the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low / VALValue Area Low is the main key level to deal with in early trade. Assume potential for short covering above that level and keeping the status quo of sellers in control below it. Target the February swing low and monitor for continuation.
- Should the market find 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. above the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low/VAL area, note that there is no potential for real change unless 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. is breached. Consider any such action to be balancing.
Weighted S&P A/D Line Indicator
This script plots both an unweighted and a weighted A/D line using the 11 S&P sectors and their respective weights. This gives the trader a huge edge in discerning the strength of moves and also knowing when there is positive or negative divergence in heavier versus lighter weighted sectors as the day unfolds.
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