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 /ESU21 and /NQU21 Futures are posted free every morning in the ShadowTrader Swing Trader newsletter.
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Click HERE for a market profile key that will help you interpret the chart above.
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 to net shortThe concept of being more short than long in an options spread by creating options spreads where you are selling more structures than you are buying or selling wider structures than the ones you are buying. Example would be a broken wing butterfly. This spread is made up of two structures, one long vertical and one short vertical. In the BWB, the short vertical is wider than the long vertical. When you are long this spread, you are said to be in an options position that is "net short" |
| Current Price/Overnight Range | 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 | bullish |
Key Levels for Today
| 4433.25 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. High / ATHAll Time High |
|---|---|
| 4416.75 | RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. Low / 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. |
| 4411.75 | TPO(MP) Stands for “Time Price Opportunity”. It is the smallest unit of measure displayed any market profile graphic, denoted by a single letter. Each TPO represents a point of time where the market being charted trades at a specific price. A single TPO is printed on the chart every time that a certain price is touched during any time period. Typically, the periods are set to 30 minutes. Therefore, every different letter that you see in the market profile distribution denotes a different 30 minute period. POCPoint of Control, also known as the "fairest price to do business". It is the price level in the /ES where the greatest amount of volume in the prior RTH session traded. ShadowTrader measures the POC using volume but the traditional way is to mark off the widest point of the day's distribution where the most TPO's printed going across from left to right, indicating that that was the price where the most time was spent. It's important to pay attention to both the volume POC and the TPO POC. 8.5 / 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. 8.8 |
| 4400.50 | VPOCVirgin Point of Control. This is a point of control level that has not yet been tested (traded through) during an RTH session. If the POC gets tested during an overnight session, it does not count and remains "virgin" until it happens during a day session. 8.4 |
Ongoing Narrative / Commentary
Not much to discuss when the overnight range is completely within the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. range and current prices are ticking dead on settlement. As earnings season is winding down to a trickle, the market may be looking for the next catalyst.
Yesterday’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. activity gave us some M.G.I.Market Generated Information. in the form of failing to test the prominent POCProminent Point of Control. This is a point of control level measured by time and not volume which is very wide relative to other areas of the distribution. It is a price level where every single (or almost every) TPO period traded. Prominent POCs are important as they have greater odds of being tested in subsequent sessions than less prominent POC levels. When measuring the POC by time and not volume, note that there can be a number of levels that are the same width. In the snapshot above, the green line of TPO's is where the most volume traded in the session. This is a good level to use as the prominent POC, keeping in mind that any of the wide areas can be turning points. If you look closely at the graphic, you can see the in the circled area, every TPO period (from B to O) is represent... that is just below us from the 8.5 session. If you recall, the area was tested in an overnight session but never in an RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. session. We carry this forward in our narrative as a sign of momentum trader strength. It’s a short term type of strength, but strength nonetheless.
Scenarios
- Assume yesterday’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. session and the overnight session to be in balance. As the overnight low and the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. low are almost identical, assume a potential downside breakout below that area. On the upside, note that the RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. High is almost a match with the prior day’s RTHRegular Trading Hours. In the /ES this means the price action from 9:30am EST to 4:15pm EST only. High, so assume the same potential breakout there. Holding within range denotes further balance.
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