I see this all the time. Market is trending down. After a respectable decline there is a volume spike and the price reserves. (QQQ/SPY) What is the characteristics of this spike in volume generating a price reversal? Is it a single order? Is it a market order? How is a large market order processed against the book? I have seen this kind of action near low of the day that makes sense but also at higher levels. Why run a big buy program after a relatively large increase in price?
It cannot be a single market order (unless a fat finger of course), because this would move the market too much and the whale or market participant would get much worse fill. It should be filled something with VWAP or TWAP.
Market orders take liquidity (limit orders as shown in the order book). If the sum of market orders (demand) exhaust available liquidity (supply) at a given level - the market will move higher or lower as a result until those market orders are filled. When the market is in balance, i.e., demand equals supply, the market ain't really going anywhere. One way to see the market is as a continuous two-sided auction.
Here is some great information about Program Trading - this may or may not help. I used HL Camp & Co. - many years ago - and found them to be very accurate - as far as Program Trading goes. Because of the way I trade now - I do not use them anymore - but hopefully this will help some traders. http://www.ptrpbi.com/ https://www.programtrading.com/index.html https://programtrading.com/seminars/summer%202022.htm
First, how do you know that these are market orders, let alone a single order? These days, HFTs and algos of all stripes use various order tactics to fool everyone else. It's nearly impossible to pin down these orders. As far as soaking up all the orders on the book, isn't that the only way to reverse the direction? It's like applying the brakes to slow down the car before making a U-turn. I'm not sure about these days, but way back in the 90s and 2000s, all the buy programs that came in towards the end of the day were mutual funds.
Could you say more about this program trading please ? What was the Reward-Risk-Ratio over a good sample of trades with their signals ? Did they have deep drawdowns ? How accurate were they and how long time is that ago ?
Most likely stops being triggered with no follow-through. Classic way for large volume to get their resting limits filled. Push price in a direction until stops trigger and fill their resting limit orders for the direction the large volume actually wants to trade.