Market Profile Analysis of S&P Futures – 04.12.18…

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Poor low yesterday indicating shorter term traders were trying to push lower and got themselves backed into a corner. Note how the overnight session never breached yesterday’s RTH low and also as it developed it created a 45 degree line from it’s low to it’s widest point. This is a classic pattern that shows people getting short at poor location where there is less and less value as you go lower.

Given all that, not surprising at all that we are gapping higher this morning. Not a true gap though, slated to open within yesterday’s RTH range at this point.

The current trading level around the 2655 area is key today; the market had trouble resolving it yesterday with multiple attempts to breach and hold over it. Let’s watch it closely today.

Overnight inventory is 100% net long. As such the early trade will be defined by monitoring to see how much of that gets retraced if any. Yesterday’s RTH high at 2661.25 is the main upside reference. Beyond that, note the 2674.78 March 27th SPX cash high as the more important longer term reference. This is the top of the “box” range that is defining trade right now.

Scenario One:
The low confidence will continue and the market will adjust the overnight inventory downward but not find stronger sellers anywhere and remain within yesterday’s RTH range. In this situation, responsive trade would be the best bet.

Scenario Two:
The overnight inventory will adjust violently right from the open and take out the ONL. This would make little sense and I place low odds on it as the overnight profile shows that traders are stuck short and there will probably be covering early.

Scenario Three:
The overnight traders will be deemed correct and the market will only come down to VAH (2653.75) perhaps and then start to rally with confidence higher. If so, yesterday’s RTH high is the first target and then the 4/5 high and onwards until we reach the SPX cash resistance level mentioned above.

As the confidence in the market is extremely low right now, I would like to say that scenario one is the most probable but that same low confidence also can surprise in either direction.

Have a nice day,
peter