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 /ESM21 and /NQM21 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 | In upper 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 | both /ES and /NQ now below 20maThe twenty period moving average, often discussed in the context of a certain timeframe such as 15 minute chart or daily chart. All moving averages discussed in ShadowTrader are SIMPLE and not EXPONENTIAL |
Key Levels for Today
| 4090.00 | 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. |
|---|---|
| 4077.25 | 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. |
| 4056.50 | Settlement |
| 4051.00 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low |
| 4037.50 | Top of Gap |
| 4029.25 | 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. |
| 4014.50 | Bottom of Gap |
Ongoing Narrative / Commentary
Coming off of three days of expanded range, a balancing day would be in order today. Doesn’t mean we have to get one, just that odds favor it. 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 and already setting up for such a move. Responsive tradeA responsive trade is a counter-trend trade taken against a specific level. The theory is that when two sided trade is taking place, there will not be enough momentum to push past key levels and buyers or sellers will respond to those areas, essentially pushing prices away from them. This is the opposite of breakout or initiative trade which is more directional in nature and is generally taken in the direction of the prevailing trend. would be in the cards within yesterday’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. range.
Overnight activity made a new swing low which is bearish. We don’t consider excess in terms of lows in overnight sessions, only RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. ones.
Key Levels above tell us that there is another unfilled gap below us (4.2 – 4.5) which overnight activity has started to test. None of that, of course, counts towards the gap fill as only RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. activity can do that.
The market has started to pay attention to rates again as they’ve crept up in lockstep with the recent tech weakness that is infecting everything else. Keep a chart of the TNX handy.
Scenarios
- Overnight activity is pointing towards potential for balance. Assume same if prices hold within RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. range and look for more responsive tradeA responsive trade is a counter-trend trade taken against a specific level. The theory is that when two sided trade is taking place, there will not be enough momentum to push past key levels and buyers or sellers will respond to those areas, essentially pushing prices away from them. This is the opposite of breakout or initiative trade which is more directional in nature and is generally taken in the direction of the prevailing trend..
- Should prices get out of range to the downside, the gap below is in play. Target 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. first and then look to the full gap fill.
James Dalton - Mind Over Markets
The seminal text on 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. theory by James Dalton. A must read for those who want to understand the auction process and the reality of price action. The starting point on any 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. journey.
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