Essentially, you are looking at something that starts as a bell curve and forms various shapes and patterns that can tell us a lot about the market and where traders are positioned. This works on any financial instrument that involves volume, whether it be an index, ETF, or stock.

We focus on the bulges to the right in the profiles above, indicating what price had the most volume and caused the market to spend the most time. I think you can see that the price that attracts the most volume and where the instrument spends the most time is a key piece of information, whether you are looking at a single day, the Globex overnight session, or the regular day session. In my case, I also look at an aggregate of the last 10-days. The “10-day POC” marked by the yellow line above is the price (about 12950) that has attracted the most volume over the past 10 trading sessions (about two calendar weeks). 

On the NASDAQ 100 profile above, the settlement at yesterday’s regular session close was 13071. Since most of last night’s trading occurred below that level, we can say that traders are coming into today’s session net short. As the session opens today, those traders may help drive a rally as they go to cover their shorts this morning. Overall, however, the overnight profile is in the middle of yesterday’s regular day session, giving us little direction about today’s regular session trading. Every profile gives different information about the day that might be ahead.

The Navigator swing strategy is 25% S&P 500 and 25% NASDAQ 100, and I am looking to add to those positions on pullbacks.

Today’s Day Trading Plan

Now that you have a better sense of the profiles as set forth above realize that a lot of the key levels and concepts I talk about here come from the profiles above.

Yesterday, I noted that the Friday low should be considered secure. Accordingly, and for now, pullbacks to the 15 or 30-minute 21 EMAs are buyable unless we take out Friday’s low. The NASDAQ 100 continues to lead,  which gives lower odds of any short setups working in the S&P 500.

Overnight inventory is net short but not 100%. The entire overnight range is within the RTH range, which indicates balance.

Use yesterday’s settlement at 3812.62 (S&P Futures) and 13071 (NASDAQ 100 Futures) as bias lines. Otherwise, follow the quartet and monitor for continuation. There is a lot to digest, especially in the NASDAQ 100, from yesterday’s gains.

A.F. Thornton