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.
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