SPY Order Flow: Short Aims For 3 to 1 Risk Reward

The unfinished business to the downside in the SP500 continues its course.

The OFA script features a goldilocks scenario with increasing velocity and magnitude to the downside while buyers have been tapering off.

As a reminder, a 100% projection target from the last bracketed area (see rectangle ) takes us to 365.00, which aligns with the previous trend lows, before the ultimate 3:1 goal.

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.