Market Profile Blog – Friday, September 4, 2015

Posted by preznicek at 8:52 AM on Friday, September 4th, 2015

Good Morning

Value areas and POC figures for /ESU5 and /NQU5 are posted free every morning HERE.

Maybe bad news is sometimes just bad news and futures sell off a bit even if it means the Fed is not going to raise rates in a week and a half. Odd, isn’t it. We’ve been living in a bubble so long that reality seems strange.

What all that means above is that employment numbers which just dropped about 15 minutes ago were weak and after a small pop upwards in the futures, they resumed their downward trend which had been in place for most of the evening.

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Overnight inventory is net short. Not all the way but quite short. I am noticing more and more as I look at this stuff that this is the first question I ask myself. Goes hand in hand with “are we opening in balance or out of balance” as my mentor, James Dalton likes to say……..

So……opening out of balance in relation to yesterday’s range and back down into the range of 9/1 and 9/2.

The gap is large, almost 20 as of this writing and as such should be treated cautiously (to me at least). Gap rules are in play. With the gap being very close to the uptrend line from the lows of this move, that’s where my major focus is this morning. What will price do relative to this line….

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I think the market has trapped more than a few bulls in the recent short covering rally. Note how in yesterday’s distribution the POC didn’t migrate higher at all and even thought we closed low in the range, there was a lot of price exploration upwards. People are stuck up there and it’s reflected in this morning’s gap.

Onwards and upwards (or downwards as the case may be)…..
-peter
**Am on SquawkBox for Brad all day today. Come on by and let’s navigate this together**

Market Profile Blog – Thursday, September 3, 2015

Posted by preznicek at 9:20 AM on Thursday, September 3rd, 2015

Good Morning

Value areas and POC figures for /ESU5 and /NQU5 are posted free every morning HERE.

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A large overnight range filled the gap shown above, but overnight doesn’t count. Gaps are filled when they fill in the regular trading hours. The longer blue box represents the whole gap and the upper square the portion that hasn’t filled yet in an RTH session. As you can see, gapping up about 8 currently puts us square in the middle of the unfilled portion. How the market reacts in there is anyone’s guess.

Yesterday’s high had some excess and I believe that short term players may have gotten themselves too long here. Overnight inventory is very net long but not 100% so.

While we closed at the high yesterday on some very late day buying, note that value between 9/2 and 9/1 is relatively the same with most of yesterday’s value overlapping the prior day’s. The day structure is also anomalous indicating some forcing action. I will believe a larger shift to the bullish side if value can start to build higher, perhaps inside the gap.

In the bigger picture (read: longer than the day timeframe), I continue to focus on what the 50% retracement from the all time high in the SPX to the recent swing low is. That number in the cash index is very close to 2000.00 give or take a few decimals. Until we close a daily bar above that, traders should still assume the market is weak and vulnerable to further selling.

Have a great day,
peter

While

Wednesday, September 2, 2015

Posted by preznicek at 8:50 AM on Wednesday, September 2nd, 2015

Good Morning

Value areas and POC figures for /ESU5 and /NQU5 are posted free every morning HERE.

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Very large gap down yesterday held and moved definitively lower, establishing value that broke away from the prior day. That’s more bearish, obviously, than when it overlaps.

Focus today should be the fact that the ONH is just two ticks below yesterday’s RTH high and above that there is an enormous gap that could fill either all the way or partially. That RTH high is at 1939.50.

Overnight inventory is net long but not nearly 100% so. Currently we would be opening in balance and at the upper end of the VA. As yesterday’s range is large an inside day might be in the cards. I would use some caution inside the VA and be more aggressive if the market wanted to move out of balance in either direction.

Although I speak of a possible move over yesterday’s high and that it would be playable, that is a call for the day timeframe. The overall trend is down and rallies are probably going to be sold unless something happens technically that changes the picture. Within every trend exist many shorter term counter-trend moves that can not only be played but should be taken in stride even if you don’t, understanding that volatility works both ways. So when you have 60 SPX down in one day, don’t be amazed, scared, pissed off, disgusted, whatever when you get +40 to the upside if you are a bear. Either play it long or pick the spot you want to reload shorts at a far better price.

Have a great day,
peter

Market Profile Blog – Tuesday, September 1, 2015

Posted by preznicek at 8:59 AM on Tuesday, September 1st, 2015

Good Morning

Value areas and POC figures for /ESU5 and /NQU5 are posted free every morning HERE.

My thoughts yesterday were that with a market so jittery we would have fallen out of balance yesterday on weakness. I guess it takes more bad news out of China to do that as futures are down 50 and markets are back down into the lower 1900′s.

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There’s a thin part of the 8/26 profile that looks like it will get repaired today as futures are trading right inside of it now. Additionally, we are very close to halfback of this recent up move retracement. A good part of my focus today will be on this area which is around 1912 as shown below1.

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There is some action above yesterday’s settlement but its so little compared with everything below that one can assume that overnight inventory is 100% net short. I would expect some sort of retracement to correct this situation a bit. If we get none, the market should obviously be considered even weaker. Where such a fade would go is not easy to figure out here as you can note that recent moves in the areas above us have a distinct lack of congestion (think: value).

Have a nice day
peter

Market Profile Blog – Monday, August 31, 2015

Posted by preznicek at 9:15 AM on Monday, August 31st, 2015

Good Morning

Value areas and POC figures for /ESU5 and /NQU5 are posted free every morning HERE.

Last day of the trading month and futures down 19 currently on the heels of China and other markets selling off a bit overnight. Coming on the heels of the volatility that we’ve had recently, doesn’t down 20 feel like down 2?

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My focus this morning is on the low of Friday (the purple star). Friday was a balancing day. As such balance rules are in play. Currently we would be opening right at the lower end of balance as the futures are trading right at 1971.50, dead on that RTH low. Overnight inventory is 100% net short. Whenever that is the case and you open out of balance and then move back into the prior day’s range, shorts tend to cover. With the market trading just inside, it’s rather tricky here. The best case scenario for a fade would be to open a bit lower than here and re-enter Friday’s range a bit later in the morning after sellers fail to take out the ONL at 1959.25. Opening within balance will be trickier.

I am carrying this fact forward into today, and that is the if the market were weaker here wouldn’t overnight action that broke out of balance stay out of balance? Futures were down 20.50 at their overnight lows and well below Friday’s RTH low. To rebound all the way back into Friday’s balancing range implies to me that shorts are the more nervous party, rather than longs. It’s really that simple. The market is never anything more than an auction process between players who either already have inventory on hand that they need to dispose of or are coming into the market to establish some.

Marinate on that for a minute………..
Peter

Market Profile Blog – Friday, August 28, 2015

Posted by preznicek at 8:52 AM on Friday, August 28th, 2015

Good Morning

Value areas and POC figures for /ESU5 and /NQU5 are posted free every morning HERE.

In yesterday’s blog I laid out the scenarios that could occur when balance rules were in play. The market chose door number 1, which as look above and go. Overnight inventory was basically 100% net long yesterday and that didn’t faze buyers from saying “gimme more” once the bell rang.

My focus yesterday was on the gap from 47.25 to 68.00. We closed it early, went up into that 8/21 range, fell out temporarily and then rallied back and continued strongly into the close. Information to carry forward, a weaker market would have been rejected immediately at the gap fill and fallen back hard. Yesterday’s didn’t so I carry that forward into today’s trade.

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Today’s overnight inventory is close to 100% net short, however we are opening squarely in the value area, so I don’t think there is an early trade today. As of now we are trading above the high of 8/21 and thus the gap fill is holding. I am going to keep that level in mind today. Yesterday’s value area was clearly higher and needs to stay so if the bears are going to remain “on the run”. Note how the ONL is at 1967.25, just three ticks below the top of the gap. That’s not a coincidence.

There were a few anomalies in yesterday’s distribution. Nothing major that couldn’t be smoothed out with a hot iron applied to the right edge though.

The ONH at 1992.75 is outside of yesterday’s range but a few handles, thus I wouldn’t get too excited about a two day high breakout unless that ONH can be taken out.

Have a wonderful day and tune in to your thinkorswim platform under the support/chat tab where I’ll be moderating the SquawkBox for Brad all day long.

-peter

Market Profile Blog – Thursday, August 27, 2015

Posted by preznicek at 9:28 AM on Thursday, August 27th, 2015

Good Morning

Value areas and POC figures for /ESU5 and /NQU5 are posted free every morning HERE.

Click to Enlarge

Click to Enlarge

The bottom of the profile is purposely cut off to show the upper end which its the higher end of the recent balance. Although the markets have been wild as of late, the last two days represent balance in relation to Monday’s decline. Yesterday’s action is within the prior day’s as well, so the coil is wound that much tighter. Balance rules apply. Let’s recap:

1. Look above and go
2. Look above and fail
3. Remain within balance

The market as of late has been characterized by large gaps upward that have failed either immediately or by the end of the day. This one today is gapping up above the high of the balance area. Does that make it different? Maybe, maybe not. Early trade will tell us the deal. If we move back into balance, expect the market to remain weak. Acceptance above, gets more short covering happening and the market could easily rally monstrously. I believe people are very short currently.

Structure yesterday for the bulls was poor. Although the late day advance was large, note how the value area didn’t move up at all and is actually lower than the prior day with very minimal overlap. (Profile is condensed with four ticks in every one price level).

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The overnight high thus far is 1965.00. Note that the gap fill of the gap between 8/21 and 8/24 would happen at 1968.00. I’ll be watching this level closely early today to see if there is rejection or acceptance. That may be a good short entry there with excellent risk/reward. If the market trades a few handles into that range above 1968.00 bail out. If you can hold the short and we re-enter balance, then the target is often to the other extreme of balance which would be a very large move.

Have a great day,
peter

Market Profile Blog – Wednesday, August 26, 2015

Posted by preznicek at 9:00 AM on Wednesday, August 26th, 2015

Good Morning

Value areas and POC figures for /ESU5 and /NQU5 are posted free every morning HERE.

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The above graphic is “in fours”, meaning that ever four price intervals are condensed into one so the graphic can be small enough to fit on one page. Read More…

Market Profile Blog – Tuesday, August 25, 2015

Posted by preznicek at 9:13 AM on Tuesday, August 25th, 2015

Good Morning

Value areas and POC figures for /ESU5 and /NQU5 are posted free every morning HERE.

This is the wildness that starts to happen when volatility rises. Embrace it, it’s an opportunity, not something to be scared of.

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The graphic above is “in fours” which means that four price levels are condensed into each one so that the profile is not as tall and I can show it all on one page including a small slice of the prior day to show the gap.

The entire overnight range is contained within the RTH range and the ONL is just one tick below yesterday’s settlement. Right away, I carry that overnight low forward as a possible downside breakout point. Maybe not today, but maybe later. The ONH is a couple ticks below the RTH high. I’ve circled the gap on the upside that would probably fill if yesterday’s high is taken.

Overnight inventory is 100% net long today so a fade from the open if the short covering momentum starts to fade would probably be playable. Remember that as this would be happening inside of the prior day’s range, it’s not as cut and dry as if the gap was outside of the range and you were looking for a true gap fill. This is a gap relative to the prior day’s settlement but not to the prior day’s high or low.

As the momentum is large now and volatility has increased greatly, the focus should be more on initiative, breakout, and directional type of movement as opposed to the responsive trade that has been the trade for so long before this breakdown. The latter can still work, but the former is the bigger and better trade in this environment.

Have a great day,
peter
…and go back to yesterday’s post and read the last paragraph if you didn’t yesterday. Ben Lee is going to be coming back to our site really soon with some awesome trading psychology content. I should be dining at that table myself.

Market Profile Blog – Monday, August 24, 2015

Posted by preznicek at 9:24 AM on Monday, August 24th, 2015

Good Morning

Value areas and POC figures for /ESU5 and /NQU5 are posted free every morning HERE.

I’m not even posting a profile pic today because I can’t get it small enough to show you the overnight action in relation to Friday. It’s just one long thin move down all night. Read More…