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 /ESH22 and /NQH22 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 |
| 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 | neutral to bearish, below 20 and 50 SMA daily |
Key Levels for Today
| 4688.25 | 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. |
|---|---|
| 4665.00 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. High / 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. |
| 4653.25 | 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. |
| 4646.00 | 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. |
| 4618.75 | HalfbackA term for the halfway point between the high and low of any session, could be a day session or an overnight session. On Peter's market profile charts it is always a dark yellow horizontal line at that level. |
Ongoing Narrative / Commentary
Large short covering reversal yesterday which was a bit of a head scratcher only because it happened just after breaking trends in both the /ES and and the /NQ.
Overnight action continued that theme for at least part of its session but has since come down just to the top of yesterday’s range which 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.. 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 for today’s session and will tell us a lot about the natur of the buying late day yesterday.
VPOC’s
- 01.05 4780.00
- 12.03 4508.00
Scenarios
- If there is a small gap by the time we open, focus on the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. High and whether or not prices move into 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. or not. Remember that opening above 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. and holding is the most bullish outcome with subsequent amounts of penetration/acceptance into 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. incrementally less so.
- Note that the M.G.I.Market Generated Information. that we have so far has an overnight low which is about in the middle 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 shows overnight 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. of the higher prices. This does not mean automatically that the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. session will continue but simply that you should pay close attention to 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. in early trade. If 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 taken out, target the Bottom 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. and monitor for continuation from there. Any 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. below halfbackA term for the halfway point between the high and low of any session, could be a day session or an overnight session. On Peter's market profile charts it is always a dark yellow horizontal line at that level. puts sellers firmly back into control.
- Prices that can stay out of range would indicate that shorts are not done covering and pullbacks may be buyable if we can hold outside of range.
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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