Several readers asked me about the market reversal this morning. Here's a Market Delta chart of the morning turnaround. As always, within each (10 min.) bar at each price are two numbers. The first is the volume transacted during that time when that price was the market bid. The second is the volume transacted during that time when that price was the market offer. Note that the price levels are colored green if volume at the offer exceeds that at the bid (net buying interest), and the color is red if volume at the bid exceeds that at the offer (net selling interest). On the bottom, X-axis, we have two numbers for each bar. The first is the total 10-minute volume in the ES futures. The second is the difference between the volume at the offer and the volume at the bid during that 10-minute period.
What makes this chart unique is that only trades of 200 contracts or more are charted. I'm only looking at what the large traders are doing.
Note that large traders started lifting offers once we got below 1443. We got a nice bounce and then, on the next pullback at the 9:20 AM CT bar, we can see that selling volume among the large traders really dried up. That led to a fierce rally that reversed the morning decline, with significant lifting of offers among large traders. On the subsequent pullback, we hit a negative TICK reading below -650, but note that volume at the bid among large traders was *very* modest. From there we moved steadily higher.
Quite simply, large traders bought the lows and stopped selling the market after the initial decline. We don't know all the reasons why, but I'm not sure that 's necessary. All we need to know is where the institutions and large locals are doing their business within the bid/ask matrix. That reveals quite a bit about their sentiment. And it's something the vast majority of traders, looking at simple bar charts and candlesticks, never detect.