A Bullish Start with a Shocking Twist: Classic "Rug Pull"

Market Rundown

October 03, 2024

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"In the face of constant change, adaptability is the only survival skill."

Hello, my friends!

This morning opened with all the signs of a strong bullish breakout, as the market set up for what seemed like an inevitable Impulse to the upside…

The indices were forming higher lows, showing steady upward momentum, while the VIX was selling off, indicating volatility was on the decline.

Then, at 10:13 AM, everything changed.

Out of nowhere, the market took a sudden and rapid twist - a “rug pull” moment that flipped the entire sentiment.

What looked like a risk-on, bullish day suddenly turned into a rebalance to key support levels.

So, what happened?

Let’s dive deeper into how the market’s algo-driven shifts played a key role in this dramatic reversal and what it means for future moves.

NY Impulse - SPY (-0.63%)🗽📉🔻

9:30-10:15 Est

Today, my focus was on SPY (S&P 500), as it was the key indicator and confluence guiding the overall market direction.

  • From the start, price was supported by the largest 0DTE Put level at 567, and impressively, it never broke below this level.

  • Then, the stage was set for more bullish momentum when high-impact economic news hit the tape - ISM Services came in well above expectations, fueling the upward narrative even further.

  • As price surged, we saw a push into the previous day's high and approach the critical 0DTE HVL 570 zone. This was where things got interesting, as the gamma conditions started to shift, creating a potential imbalance in the market.

  • BUT then… at exactly 10:13 AM, a sudden volatile trigger event hit, sending shockwaves through the market.

  • President Biden came along and had a few words to say…

    • Was it truly unexpected, or were there clues hidden in the setup all along?

    • The location of the event could not have been more perfect since price was in a region of high volume and significant options exposure

Live Economic Speech ⚡

  • Biden: “We are discussing Israel striking Iran oil facilities.”

  • IMF Spokesperson: “Further escalation of conflict heightens risks and uncertainty, could have significant economic ramifications for the region and beyond.”

The “Algo Shift” was triggered and what does this mean?

  • Wave of automated buying or selling causing sharp price movements

  • Private, high-frequency trading firms managing millions of trades in milliseconds

  • Operate in real-time based on market conditions

10:15-12:00 Est

  • Following a sudden bearish fundamental event, the morning’s strong buy-side move hit its peak and swiftly unraveled.

  • SPY quickly sold off, dropping back into its key demand zone at 567, marking a dramatic reversal that took traders by surprise and ended the day into another range-bound balanced scenario

  • SPY 567 (0DTE Highest Level of Put Gamma)

  • SPY 570 (0DTE Positive/Negative Shift)

0DTE Levels: Zones of significant options volume in underlying assets, that can trigger an increase of volatility as the expiration approaches

These market levels are recalculated and updated daily, taking into account factors like gamma expiration, trading volume, and market volatility.

Coverage include Stocks, ETFs, Indices, Futures, and Crypto. For the most up-to-date levels and analysis, all information is available on MenthorQ.

Fun Facts: SPY (S&P 500 ETF)🔍📅

  • SPY was the very first exchange-traded fund (ETF)

  • The most traded ETF on a daily volume basis

  • SPY pays quarterly dividends, offering investors a way to earn income

  • SPY as a key indicator for overall market health and direction.

Algorithmic shifts are an unavoidable part of modern trading.

They add complexity and volatility to the markets, but they can also offer valuable signals if you know how to read them.

Rather than getting swept up in the hype of every sharp move, focus on understanding why the algorithms are driving the market and align it with your checklist.

Remember, as a entrepreneur, your goal is to locate the trend and strategically position yourself to take full advantage of the momentum.

Until next time,
Steve B
Founder, The Daily Impulse

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Important Disclaimer:

This newsletter is for educational purposes only and does not offer financial or investment advice. It should not be taken as a recommendation to trade assets or make any financial decisions. Please be cautious and ensure you conduct thorough research or consult with a financial professional before making any investment choices.