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.