Market Profile Analysis of S&P Futures – 05.08.18…

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Pullback overnight creating overnight inventory about 90% net short. Prices moved below yesterday’s RTH low and have since rallied back well inside of yesterday’s RTH range. This is often my first starting point in the morning to get a feel for how strong sellers are on a gap down. Answer, not very. A weaker market that breaks the RTH low should attract new sellers. As such the ONL at 2658.50 will be our downside reference point for today’s trade. Anything above that is just status quo which is continued balance of the 5/4 rally.

Value was cleanly higher yesterday even with the lack of a huge point gain at the close. The volume POC also moved up nicely. I see all that as bullish although in this environment let’s just call it a lack of bearishness before we go and give this market any credit it’s not yet due.

The upside reference this morning is the ONH at 2672.25 which is also one tick above halfback. I believe a breach of that high puts the TPO POC into play at 2675.00. If this were to play out and value was equal, that would confirm prices at these levels and put the poor structure 5/4 rally on better footing. Remember to carry it forward until it gets repaired. The longer it doesn’t, the better odds that we’re going to move higher.

Scenario One:
The overnight range defines the day and value is overlapping to down. Tempo would be slow and responsive trade against VAL, settlement, halfback, ONL, etc would be in play.

Scenario Two:
The ONH gets taken out and the market targets the POC’s (both TPO and volume). Value develops equal to higher. VAH and yesterday’s high at 2681.50 would be targeted.

Scenario Three:
Sellers emerge during the session and take out the ONL on solid momentum and internals. From there you would monitor for continuation to see if prices can hold below the ONL and target the various anomalies from 5/4. Any action of back and forth and in and out of the overnight (and RTH) range spells chop and tells us that stronger sellers are not emerging. If so, be on guard for a countertrend rally which could be violent.

The President will be announcing the decision on the Iran deal at 2pm EST. Could be some volatility then if the market doesn’t like what it hears.

Have a great day,
peter