Market Profile Analysis of S&P Futures – 04.13.18…

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Yesterday the market came within pennies of the top of the box that I’ve been discussing here in the Premarket Perspective. This morning we are facing a gap up of $15 currently which is taking prices outside of the box and for now represents a breakout of balance.

As of now the gap is a true gap thus gap rules apply:
1. Go with all gaps that don’t fill right away
2. Larger gaps may only fill partially or not at all on the first day
3. If the gap fills and value cannot get to at least overlapping, then the odds of a late day rally increase.
4. Double digit gaps are harder to trade early as they tend to just pause and “digest” the overnight move. I always feel that these gaps are more of a trade later rather than earlier scenario.

As we are breaking out of a large balance area, I would say that balance rules apply also. Thus the market can only do one of a few scenarios….
1. Look above and fail. This would mean that the overnight players got ahead of themselves and there are no new buyers to keep the direction going. In such a scenario, futures would fail back into range and then the trade may be short all the way down to the other end of balance.
2. Look above and go. The overnight action will be deemed “right” and futures will not come back into range but rather will rally well outside the balance area and have a confirmed breakout.
3. The third choice in balance rules is always that we remain in balance. In order for this to happen we would have to fail back into range and then hold for a few days within the balance area. I put the lowest odds on this choice.

2693.16 is the declining 50 ma daily on the /ES currently. If we have a ‘look above and go’ this could be a target area.

Overnight inventory is quite balanced as there was some weakness early in last nights session. This bodes well for a rally today as there really isn’t an imbalance that needs to be corrected.

Financial stalwarts C, JPM, and WFC kicked off earnings season today and all reported good earnings this morning and all are up slightly.

Consumer sentiment and JOLTS (Job Openings) are slated to be released at 10am EST.

Have a great day,
peter