Chart Example - Identifying Absorption and Reversals with SPX Direction Parameters

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We’ll walk you through a realistic, step-by-step chart scenario so you can see how the SPX direction parameters reveal intent as opposed to candles. SPX Direction parameters help members look under the hood at the underlying mechanics of the market. This allows members to understand and profit from the behavior that repeats every day on the NASDAQ 100 (NQ futures) and S&P 500 (ES futures).

📈 Scenario: Intraday Squeeze / Flush → Absorption → Reversal

🕘 Step 1 — Market Open > Range Established

At the NYC open (9:30 am EST):

We recommend that SPX Direction members do not take any trade for the first 10 to 15 minutes after market open. Instead, just allow our algorithms to gather data and spend the first 15 minutes observing whether price starts pushing above (or below) VWAP.

📍 Step 2 — VDI (Location Check)

In this example, price is:

👉 VDI = High positive displacement

👉 Interpretation:

📊 Step 3 — RVF (Participation Check)

As price pushes higher:

👉 Interpretation:

⚡ Step 4 — MA (Momentum Behavior)

At first:

But then something subtle happens:

👉 MA begins to flatten

💡 This is your first warning: The move is still going… but it’s losing power. It's like a truck that's about to reverse on the highway. It cannot reverse suddenly. It needs to slow down first before it turns around and heads the other way.

🚀 Step 5 — ORES (Expansion Check)

Early move:

Then:

👉 ORES starts to decline

Expansion → turning into failed expansion

🔥 Step 6 — Signs of Absorption

Now everything aligns:

What you see:

What’s ACTUALLY happening:

👉 This is bearish absorption

🧠 Step 7 — Is it Consolidation (Prior to Trend Continuation) or an Actual Reversal?

This is where the SPX deduction algorithm shines and gives retail traders a real edge.

 These are the signs to look for:

👉 This is NOT random chop or consolidation
👉 This is Inefficient order flow and trapping of buyers. More and more buyers get lured in, but the price doesn't go up. The reversal risk is high.

⚠️ Step 8 — One Side Gets Trapped as the Reversal Happens

👉 A lower high is created and momentum shifts. SPX Direction members will see the shift in momentum in real time with the SPX Direction Momentum Indicator.

💡 This sequence repeats time and again, daily 
Absorption → failure → structure shift

🎯 Step 9 — Entry Trigger (Execution)

You do NOT enter during the stall. SPX Direction members must wait for:

👉 Now you enter SHORT

📉 Step 10 — Sharp Reversal

Once price drops:

What you’ll see:

🎯 Trade Plan Summary

Entry:

Stop:

Targets:

🧭 Full Timeline (Simplified)

  1. Price leaves VWAP → trend begins
  2. RVF confirms participation
  3. MA strong → then weakens
  4. ORES strong → then fails
  5. Price stalls → absorption
  6. Lower high forms
  7. Breakdown → entry
  8. Reversal accelerates

🧠 What You Detect on the Chart

As price rises, price action stalls. 

That tension = absorption

⚠️ Common Mistake

Most traders:

SPX Direction traders notice something other traders don't, because they have access to our algorithm, which looks at the underlying mechanics and the plumbing of the market. In other words, they notice that things have stopped working

🔑 Final Insight

Your job as a trader is not to predict reversals; it is to use the SPX direction parameters to identify imbalances and “an effort that's taking the price nowhere” (absorption). SPX Direction helps members identify when aggressive traders are wrong in real time.

🔑 What This Looks Like on the Charts

📍 Phase 1 — Opening Range + VWAP (Baseline Context)

Do not take a trade in the first 10 to 15 minutes. Simply observe as the initial candles form a range. 

Interpretation:

📈 Phase 2 — Break Above / Below VWAP (VDI Begins)

What appears on chart with a bullish displacement:

What to look for with the SPX direction parameters:

VDI:

RVF:

💡 At this point:

⚡ Phase 3 — Strong Trend (All Systems Go)

Visual cues:

Metrics alignment:

💡 This is a healthy trend phase

⚠️ Phase 4 — First Warning Signs of Exhaustion (Momentum Shift)

What changes on the charts:

What’s happening underneath:

💡 This is subtle: The trend is still up—but losing power


Image

🔥 Phase 5 — Absorption at the High

What you see:

What each metric is telling you:

💡 This is the key moment: Buyers are pushing hard… and getting nowhere. This indicates absorption. At SPX direction, we help our members identify absorption (the precursor to a reversal) versus consolidation, which usually leads to trend continuation.


Image

🧠 Phase 6 — The Trap Emerges (Structure Shift)

What happens next:

This confirms:

💡 THIS is where you act (wait until then)

🎯 Phase 7 — Entry (Execution Moment)

What you look for:

👉 Enter SHORT here

📉 Phase 8 — The Move Down

What the chart shows:

Why it moves fast:

Image

🧭 How to Read This LIVE on a Chart

When watching your chart in real time, ask:
1. VDI

2. RVF

3. MA

4. ORES

5. Price Behavior

🔑 The “Aha” Moment

On a real chart, absorption looks like this:

The SPX direction parameters tell you what's going on under the hood. This mismatch is your edge.

⚠️ Final Reality Check

If you only look for:

👉 You’ll get faked out constantly.

If on the other hand, you combine:

👉 You’re reading intent, not just candles


 

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