SPY Order Flow Analysis - More Pain Ahead

Order flow analysis can be our ally via the right interpretation of realized market orders. In this example, we can observe a failed bullish structure followed by sellers re-taking control of the downside in a push characterized by increasing velocity and magnitude vs the previous failed buying cycle, all well depicted via the OFA script.

A 100% projection target from the last bracketed area suggests an ultimate target of circa 365, which perfectly aligns with the previous trend lows.

Remember the two key main features of this indicator:

Magnitude: A major clue that will help determine the health of a trend is the type of progress by the dominant side in control of the trend. We need to ask the following question: Are the new legs in the active buy-sell side campaign as identified by the script increasing or decreasing in magnitude?

Velocity: When it comes to the distance the price moves, the magnitude is only ½ the equation. The other ½ has to do with the velocity of the move or the speed. Was the new leg created after a fast and impulsive move? Or did price make a new low or high with the movement being sluggish, compressive and taking too long to form? A good rule of thumb is to count the number of candles it took to achieve a new leg.