Sweep Dynamics and Reversal Patterns – July 19, 2024

Trading Analysis for July 19:

Introduction

On July 19, 2024, as we approached 1:00 PM, a notable trading pattern emerged, illustrating the dynamics of aggressive buying and selling. In this analysis, we will examine the events around 1:00 PM and how they reflect on the S&P 500 using the Quarterly Theory, footprint charts, and Bookmap.

Quarterly Theory Analysis

The TradingView Quarterly Theory 1-minute diagram highlights the key area of focus. This diagram effectively demonstrates a scenario where aggressive buyers reach a certain price level, only to be overtaken by aggressive sellers, leading to a reversal.

Observations

Footprint and Bookmap Charts:

  • At 12:51 PM, a significant sweep is observed on both the footprint and Bookmap charts.
  • As the price revisits this level around 12:59 PM, the Bookmap shows that limit sellers are entering the market.

Trading Strategy

Short Trade:

  • If considering a short position, it is crucial to monitor specific indicators. The footprint chart highlights a distinctive candle pattern and delta histogram, indicating that sellers are losing strength. Additionally, the volume has decreased, signaling a potential weakening of the bearish momentum.

Key Indicators:

  • Candle Pattern: The footprint chart reveals characteristic candle formations around the reversal point.
  • Delta Histogram: The histogram shows a decline in selling pressure.
  • Volume: A drop in volume confirms reduced bearish activity.

Conclusion

The analysis of July 19 provides valuable insights into market behavior around significant trading hours. By observing the aggressive buying and selling patterns and key indicators on the footprint and Bookmap charts, traders can make more informed decisions about entering or exiting positions.

Analyzing the S&P 500 Market Close on July 15, 2024

Introduction

As we approach the market close on July 15, 2024, at 15:52, we enter what I call the “golden zone” or “sunset” period for the S&P 500. This is a critical time for traders as it represents the final trading moments of the day. Missing this window means waiting until the next day for new opportunities.

Observations Leading to the Close

Volatility in the Final Minutes

Starting in Q3, it’s crucial to monitor the volatile price movements as the trading day winds down. The price touches the second VWAP standard deviation line from below, even dipping underneath it. According to traditional trading theories, this suggests that the price may be undervalued.

Key Observation: The price moving below the second VWAP standard deviation line indicates potential undervaluation.

Footprint Chart Analysis

For this analysis, the footprint chart is set to a 10-range mode, providing a more uniform view of price movement.

Absorption at 15:51: There is an observable absorption at this time. Following this, the footprint chart indicates a strong downward price movement, forming a bearish imbalance. This could be referred to as an FVG (Fair Value Gap) on a traditional chart. In the same price range, a bullish FVG forms as the price starts to move upward, signaling a potential buying opportunity.

Cumulative Volume Delta Indicator: The CVD indicator shows a price reversal (indicated by a purple arrow), further confirming the potential upward movement.

Significant Reversal at 15:53: The volume spikes significantly at this time, marking a clear reversal point.

Trading Strategy: How Long to Hold the Position?

Once a long position is established, the key question is: how long should it be held?

Bookmap Heatmap Analysis: The Bookmap heatmap can help answer this. By focusing on the SVP (Session Volume Profile) indicator, traders can identify the price level with the highest volume, which serves as a target for exiting the position.

Conclusion

The analysis of the final moments before the market close on July 15, 2024, highlights the importance of monitoring key indicators such as VWAP, footprint charts, and volume profiles. By understanding the dynamics at play during this volatile period, traders can make informed decisions and potentially capitalize on the price movements.

Economic News and Market Analysis for July 11, 2024

Order Flow Analysis of S&P 500 for July 11, 2024

Introduction

On July 11, 2024, several significant economic indicators were released, impacting the financial markets. This analysis will focus on the Core CPI and CPI data released at 8:30 AM, and how these announcements influenced market movements, particularly observed through the Bookmap and footprint charts.

Economic Indicators

Release Times:

  • 8:30 AM
    • USD Core CPI m/m: 0.1% (Previous: 0.2%, Forecast: 0.2%)
    • USD CPI m/m: -0.1% (Previous: 0.0%, Forecast: 0.1%)
    • USD CPI y/y: 3.0% (Previous: 3.3%, Forecast: 3.1%)
    • USD Unemployment Claims: 222K (Previous: 239K, Forecast: 236K)
  • 1:01 PM
    • USD 30-y Bond Auction: 4.41|2.3 (Previous: 4.40|2.5)

Market Reaction to Core CPI and CPI Data

Observations on the Bookmap

As the release time for the Core CPI and CPI data approached, a noticeable pattern emerged on the Bookmap. By 8:30 AM, all limit orders were canceled, resulting in an empty heatmap. This indicates a high level of uncertainty and caution among traders, who cleared their orders to avoid potential adverse impacts from the economic news.

Following the news release, there was a significant surge in the price, illustrating the market’s initial reaction to the unexpected data. However, rather than trading the immediate news spike, I prefer to wait for the pullback to engage in a more stable and less volatile trading environment.

Key Insight: Trading the initial reaction to economic news can be risky due to the widening of the spread, which can adversely affect trades or even wipe out accounts without proper stop-loss measures.

Trading the Pullback

By 8:45 AM, a pullback began, and this presented a trading opportunity. Observing the Bookmap, the SVP (Session range volume profile) indicator peaked at 5685. This suggests that the price is likely to retrace back to this level, providing a more predictable and manageable trading scenario.

Utilizing the Footprint Chart

The footprint chart is invaluable for refining entry points and setting stop-loss levels. It provides a granular view of market activity, showing where buyers and sellers are concentrated.

Strategy for Entry and Stop-Loss Placement:

  • Entry Point: As the price retraces and approaches the SVP level, observe the footprint chart for confirmation of a reversal or continuation pattern.
  • Stop-Loss Placement: Place the stop-loss slightly below the identified support level indicated by the footprint chart to minimize risk.

Conclusion

Trading around economic news requires a strategic approach to manage risk and maximize profit potential. By waiting for the pullback after the initial news spike, traders can capitalize on more stable market conditions. Utilizing tools like the Bookmap and footprint charts enhances decision-making by providing deeper insights into market dynamics and helping to identify optimal entry and exit points.

Market Dynamics: Absorption and Trend Reversal on July 3, 2024

Order Flow Analysis of S&P 500 for July 3, 2024

Introduction

In this analysis, we will examine the S&P 500’s price movements on July 3, 2024, utilizing order flow and market dynamics insights. We will reference multiple tools, including Quarterly Theory charts, footprint diagrams, and Bookmap, to provide a comprehensive understanding of the market trends and identify potential trading opportunities.

Quarterly Theory Overview

The first image presents the Quarterly Theory 1-minute ES chart. This chart helps us observe the broader market movement and previous highs, providing context for our detailed analysis.

Footprint Diagram Analysis

The second image displays the footprint diagram from a bird’s-eye perspective. Two critical points are highlighted in yellow, which we will focus on in the subsequent analysis.

At 3:00, we observe the aggressiveness of both sellers and buyers relative to the VWAP line. Specifically, we analyze how the price reacts when approaching the VWAP.

Detailed Order Flow Observations

In the enlarged order flow image, at exactly 3:00, a bearish 3-minute candle is noted, yet the delta is highly positive. This is due to absorption occurring at the upper part of the candle. Sellers dominate the market until around 3:10 when the price touches the VWAP line. Here, a positive delta cluster emerges, signaling a potential long entry.

Around 3:20, a substantial bullish candle with a large wick appears. At the wick’s top, strong positive delta pressure indicates another absorption point. The price subsequently rises to this level and breaks even higher.

Bookmap Analysis

The next image presents the Bookmap analysis, focusing on the previously discussed areas. The COB histogram shows stronger bullish signals.

By observing these indicators, it’s evident that initiating long positions from 3:00 onwards is advisable. The challenge now is to determine when the buyers will be exhausted and the sellers will regain strength, potentially reversing the price trend.

Identifying Exhaustion Points

In the following Bookmap image, we identify when strong limit sellers appear above the price in red and continuous yellow. Following this, the Bookmap Sweep indicator appears, then the limit band disappears. This suggests that aggressive buyers have exhausted the market liquidity, allowing sellers to take over.

SVP Indicator Insights

An essential signal is provided by the SVP indicator. In this price area, the SVP disappears, indicating a significant volume change.

SVP (Session Range Volume Profile): This metric displays the traded volume for the entire session, beginning from when you subscribe to the instrument.

Conclusion

The analysis highlights the critical moments of absorption and the transition between buyers and sellers. Understanding these key levels and indicators, such as the VWAP and delta clusters, allows traders to navigate market movements and make informed decisions effectively. The importance of monitoring volume profiles and order flow dynamics cannot be overstated for successful trading strategies.

Failed Absorption: Order Flow Analysis of S&P 500 for July 2, 2024

Introduction

In this analysis, we will examine the S&P 500’s price movements on July 2, 2024, focusing on order flow and the impact of market dynamics. We will use various tools, including footprint charts and Bookmap, to understand the market trends and identify potential trading opportunities.

Understanding Negative Absorption in Candles

When a candle shows negative (sell-side) absorption, it indicates the following:

Buyers Holding the Price: Absorption means that the selling pressure is being absorbed by buyers. Despite a significant amount of selling, buyers are purchasing these sell orders, preventing the price from falling as much as the selling pressure would suggest.

Resistance Level: This price level can act as a resistance where buyers are strongly present, absorbing the sell orders. This often occurs at price levels where the price has previously halted or rebounded.

Potential Trend Reversal: Such absorption can signal that the market is ready for a trend reversal. If buyers successfully absorb the selling, the price may rebound and start to rise.

Doubts About Further Decline: Sellers may become uncertain about the likelihood of further price declines as the price does not drop significantly despite substantial selling pressure. This increases the chances that sellers will withdraw their positions, causing the price to rise.

Observations on July 2, 2024

Following the 3-hour mark, around a few minutes past (footprint diagram shows 4, but there is an issue with the time zone setting in Ninjatrader), negative absorption can be observed at the 5516.00 price level across four candles. This level can be interpreted as a resistance point, where significant aggressive buying has occurred. However, it is also evident that aggressive sellers dominate around the absorption area at the bottom of the candle (indicated by red histograms and negative delta). This suggests that the price is likely to break downward through this absorption level.

Detailed Analysis

At the 3-hour mark, there was an aggressive bearish candle because, as seen on the TradingView screenshot, the price responded to a previous low. Key levels are marked on this screenshot. The highest and lowest points are identified based on the Bookmap liquidity heatmap, indicating a downtrend. The price touched the upper price level and then moved down towards the lower liquidity price level. Another level is also marked, representing the TMSO level from the previous day (TMSO: Micro Session True Open, indicating the price opening at Q2).

On the footprint chart, it is interesting to observe that the Volume Profile VAL (Value Area Low) level almost coincides with the previous low. The price reacts to this level. The histogram also shows that the delta is at the wick’s bottom, indicating very rapid and strong selling.

Conclusion

The analysis reveals that aggressive selling absorption at the 5516.00 level suggests strong resistance. However, the dominant selling pressure and the response to previous lows indicate a likely continuation of the downtrend. Monitoring these key levels and the volume profile can provide valuable insights for potential trading opportunities. The delta and price movements around these levels are crucial for understanding market dynamics and making informed trading decisions.

Failed Absorption Signals S&P 500 Downtrend – July 2, 2024

This detailed analysis provides a comprehensive view of market trends and potential trading opportunities for the S&P 500 on July 2, 2024. By understanding the significance of absorption and key price levels, traders can better navigate market movements and make informed decisions.

OrderFlow of S&P 500 for July 1, 2024

Introduction

In this analysis, I aim to determine the market impact of several economic news releases on July 1, 2024, focusing on the S&P 500.

Key Observations

Economic News Releases

Several significant economic news releases occurred on this day:

  • 9:45 AM: USD Final Manufacturing PMI: 51.6 (previous: 51.7, expected: 51.7)
  • 10:00 AM: USD ISM Manufacturing PMI: 48.5 (previous: 49.2, expected: 48.7)
  • 10:00 AM: USD ISM Manufacturing Prices: 52.1 (previous: 55.8, expected: 57.0)
  • 10:00 AM: USD Construction Spending m/m

ICT Strategy (Inner Circle Trading)

According to the ICT strategy, the “silver bullet” times for trading are between 3-4 AM, 10-11 AM, and 2-3 PM New York time. If significant economic news is released during these times, the trading window can shift by an hour. The silver bullet strategy suggests these times due to high trading volumes, offering good opportunities for FVG-based trading, considering liquidity levels.

Quarterly Theory

As shown on the Quarterly Theory diagram, the height of the 3-hour candle matches the 2-hour candle. The Bookmap heatmap indicates high volume limit orders above this level, while in the opposite direction, the diagram shows almost no activity at the marked time.

Footprint Diagram

Note that the time zone on the footprint diagram is still shifted. Subtract one hour to get the correct New York time.

Delta Change Observations

At 3:03, it is interesting to observe the delta change value. This value shows the delta change of the previous candle. At this time, we see that the price rejects the previous level with a higher delta change, indicating a decreasing trend.

Notable Candle Observations

At 4:39 and 4:51, we notice positive absorption within bearish candles. This observation suggests a further decrease in price. I will revisit the price movements around the news events later.

Bookmap Analysis

In the Bookmap analysis, it is evident that there is an enormous amount of red-colored limit sell orders above the 5541 price level. Below this level, the heatmap shows almost no activity, indicating a lack of buying interest. The price is currently at the first VWAP standard deviation, suggesting it is significantly overvalued.

Conclusion

Based on the analysis, including delta shifts, ICT strategy times, and Bookmap observations, we can conclude that the market shows a tendency towards a decreasing trend, especially highlighted by the significant delta changes and absorption levels noted. The Bookmap analysis further supports this with the significant sell orders above 5541 and the price being at an overvalued level according to the VWAP standard deviation.