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S&P futures relatively flat coming into today’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. session with /ES down 2.25 and /NQ off by about 10 as of this writing.
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 just slightly skewed net long, not enough to be of any import and we are also not trading on any 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. (outside of prior day’s range) thus gap rules do not apply.
As I discussed in detail in this weekend’s video, Friday’s distribution was of the “p” formation which more indicative of just short covering rather than the more potent combination of short covering and new money buyers. As was also discussed, note that in four of the last five RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. sessions value has been overlapping. This is also signalling that buying pressure may not be enough to continue to power the market higher at this juncture.
2551.75 is the upside reference for this morning’s trade as it is 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.. 2539.25 is Friday’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. high and had a small amount of excess on it. Obviously we would have to come out of the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. range in order to put 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. into play.
On the downside, the references would be 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. at 2523.25 and VALValue Area Low at 2512.00. A weaker market will take out 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. early and start to 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. deeper into Friday’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. range. A stronger market will support above that 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. and start to build value higher.
I’ve left the note at the 2531.00 level on the chart which marks off the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. double bottom area which what I’m calling the lows of the 12/17 and 12/18 sessions. As i write this I’m noting that S&P futures are currently trading right at that level after moving higher overnight and failing and also getting a bit of 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 this level on Friday afternoon. Levels that are noteworthy often take a bit of time to resolve so unless we see a definitive move higher today that can take out 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 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 it, we can still look at this area as resistance.
The overall feel and how I’m approaching things today:
-Whenever I see futures relatively flat and trading inside of the prior day’s range, I automatically think the better trade will probably develop later rather than earlier.
-The potential for a stronger down move is there as structure has been poor on this recent short covering rally and prices have tried to move above that 2531 area repeatedly but are not finding enough new buyers there to hold and move higher. A move above 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. (on good volume, tempoProbably one of the most important and yet overlooked concepts in the market. The tempo is simply the ‘speed’ at which the market is moving. This is also referred to as confidence. Slow tempo is typical of range bound days where there is lots of responsive activity. Fast tempo occurs when there is initiating activity, and market is breaking out of a range. This is not to say that the market can’t have fast tempo on days when it is rotational or moving between the extremes of a value area. It certainly can. Effective intraday futures trading involves gauging the tempo and knowing that opportunities are fewer and smaller when the tempo is slow. See S.O.H., and internalsInternals refers to “market internals” and is a blanket term to collectively describe the advance decline, breadth, tick and cumulative tick.) would negate this theory.
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