ES 21 Feb 06 Market Profile

What does the b shape tell us?

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...and the following day (22 Feb 06) in the ES we have the inverse P shape.

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Thanks for this great site..Guy.full of fantastic information. I noticed in another thread that you seem to have some challenges with the longer term composite profiles....perhaps I misread your reply but I have a problem here also... I see some using 5 day overlays, 10 day overlays, 20 day overlays, Monthly, cumulative overlays from the begining of the year etc......I'm wondering if there is any definitive answer to which time periods we should give the most weight to...in other words should we be looking at last weeks Value area or Poc's for this weeks trading...should we look at last months? No where have a seen a definitive answer to longer term profile trading that is consistent...no offense to Alleyb but those overlays have been traded above and beyond even if Larry williams and the commercials where/are short...I really like MP for short term but these longer term ideas aren't making any sense to me...any help would be appreciated

Thanks
Bruce
and apologees if any offense is taken by this post

One more thing..Given the fact that we had a "B" structure followed by a "P" structure and then today we filled in the middle would it make sense ( translates into makes cents...and $$$'s) to use the last three days and run a composite with the value area etc......Gheesh..this stuff is going to drive me crazy

Bruce

I don't pay much attention to multi-day profiles for one simple reason - you can find a support and resistance line at each tick above and below the current price if you combine the right number of previous profiles.

The most important profile is from the previous day - especially if you watched it develop. The exceptions are Single Prints from days before. These tell us about the other profiles from previous days that had important breaks from the day-time to other-time frame traders. This sort of information we carry forward.

The current developing profile is the most important and its relation to the previous session is paramount. The traders that contributed to developing last week's profile may not be around today while today's traders are here and still active in this profile.

I worked for a fund management company that ran a global asset portfolio. An example of their client mandate statement such things as (these are only examples):

Max exposure:
US: 50%
Canada: 40%
Europe: 30%
Asia: 20%
Latin America: 20%

They re-balance these colossal portfolios once a month. During the previous month they may have stacked the portfolio to the max in (say) US. The following month, due to market moves, the percentages have shifted such that US represents 55% of the portfolio. Even though they love their US positions and want to hold them they are forced to sell the excess 5% of their portfolio to comply with their client mandate.

Now I mentioned this because this is an example of an investor, who is bullish on the US market, but comes in and sells the S&P500 futures just on 1 day of the month because they are forced to. To outsiders who don't know what's going on it may look like they've turned bearish or are taking profits - neither are true.

So every time we see trades going through the market we have to remember that there are a million reasons why someone might be reacting now in the market. The best that we can do is watch how the market reacts to all these movements and the only way we can see that is through the developing profile.

I started rambling a bit back there so not sure how much of this is making sense now... Hopefully someone gets something out of this.

Re which is the right distribution to look at:
You take the distribution that is currently working in that you are looking for the dominant trader activity.... whom Pete Steidlmayer referred to as the Other Time Frame Trader. Yes there is an element of subjectivity in the objectivity. Participants with DIFFERENT time frames have DIFFERENT NEEDS & OBJECTIVES. From what you are saying you are treating all timeframes and all prices as equal. They are NOT. If you treat all timeframes and Prices as equal then your strategy is inflexible and subject to responding mechanically and on that basis you cannot expect to succeed on a regular basis.(I have parphrased Pete's words). Now Don Jones teaches you in the demand overlay tips to look at 5 , 10 day etc. This is not the place to debate the merits of this but there are certain distinct time frames to look at depending on the product. One such example is the New Crop vs the New Crop in softs. There are plenty of other examples especially in Financials but again this is not the place to debate the merits of this. To reiterate it is the distribution that is before you that you need to look at and it ain't over until it's over. You establish the beginnings and endings by looking at the count of the CTi2 in terms of the overall auction and therefore their position. You monitor change in market activity as it occurs becasue the MP (Price+Time=Value) captures CURRENT range development and consequently with the equation yielding distinctions between Price and Value, you can therefore make any nevessary adjustments without difficulty. Again no apologies for quoting Pete "Consistent performance depends on LOGICAL DECUCTION - about WHAT is ACTUALLY happening in front of you" (My emphasis in all cases)

Hi AlleyB,

I think you mentioned the key word and that is subjectivity. With one days profile at least we have the high and low volume areas , the upper and lower value area and the POC and we have a time period defined which obviously is one day. I beleive it would be difficult to define what the masses are looking at in a composite profile because so many alter the time period ( days, weeks , months ...as per my previous post) .When you get back from NYC or have more time perhaps you can post some chart points that conisitently work on longer time periods but for now I'll have to stick to using the day time period and keep track of individual days high and low volume areas represented by the poc's, tails and single prints...