Monday, April 12, 2021

How to read the MrTopStep Market Imbalance Snapshot..

Each day shortly after the 4pm ET New York close, a copy of the MrTopStep MIM is published to our site and feed.  This is how to interpret the data.

We take a daily snapshot every 10 minutes between 3pm and 4pm ET of the reading on the MiM, our proprietary closing imbalance meter,  as well as the value of the SPX (S&P 500) index at that time.  Positive and negative delta moves are saved in a “mileage” table just like the old paper maps.  Remember those?

Legend:
$PCT = The percentage of the dollar value of the imbalance on either the buy or sell side of the imbalances.
#PCT = The percentage of the symbols that are advertising an imbalance (either buy or sell) and the bias direction of those symbols.
Size = The size of the difference between all the sell imbalances and buy imbalance. ie. The net imbalance.
SPX = The value of the SPX.

The numbers along the top in orange,  :01 -> :00 represent 3:01 ET -> 4:00pm ET, and are proposed entry times. Vertical scale is the same time, but exit times.
You will notice that there are two times in the time portion of the table that are highlighted, those represent the maximum negative value, red, and represents the best short on the chart and maximum positive value, green, and the best long of the day in this time frame.

2-18-2015 5-28-15 PM

I have picked this sample above to discuss since it has a lot going on. Read the vertical Exit Time column to follow this discussion.

At 3:01pm (:01) , 3:10pm and 3:20  of our tracked symbols (#Pct), 53-54% of them are selling imbalances.  Notice though, on this day, the dollar value (%PCT) of the buy side imbalances was greater than the sell side, therefore our dollar value of the net imbalances  ($Pct) were actually 62-61% positive during that time.  That is called a “divergent” MiM and can show us there is more conviction on the buy side for this particular day, even though as slightly higher count of the symbols is sell imbalances.

At 3:30pm the symbols(#) joined the dollars and the dollar side grew too.  This is not a particularly strongly positive MiM but trend is important and as time moved forward the MiM became stronger, not a good time to be shorting.

Looking at the trade matrix, we can see there was little opportunity for shorts to make any money here.  In fact the best short would have been a 3:30pm entry with a 3:40pm Exit.

On the long side on this particular day it would have been hard to lose money in that last hour of trading.  The best entry was at the top of the hour, 3:00pm and exit on the close, that gave you 5.3 points (the green highlighted point)  on the SPX. You will have to extrapolate that into your trading instrument (ES futures, options, SPY etc.. ).

We trade the MiM interactively everyday in the MiM trading room.  A rider’s pass for a month in only $99 to watch the close interactively and to ask questions in real-time. Even if you join us for a month, the education of how the markets close mechanically is important for any trader that trades that last hour.  Sometimes it is not about fundamentals or technicals, sometimes it is just mechanical and the big institutions might need to redeem, put money to work or rotate sectors or cash etc.  The ability to see the thinking early is invaluable.

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