Dark pools are alternative trading systems designed to facilitate large trades by institutional investors without impacting the public market. They allow participants to buy and sell securities anonymously, keeping the details of their trades hidden until after execution. This advantage has led to its increasing popularity, and for the first time off-exchange volumes have surpassed those on on-exchanges.
By tracking dark pool orders, we can gain valuable insights into institutional sentiment. For example, multiple large buys or sells in dark pools often signal bullish or bearish trends, respectively. Monitoring these trades helps traders anticipate potential market movements before they become apparent in public exchanges.
On September 9, I revealed a massive $6 billion dark pool print at the $650 level—an unusually large order nearly matching the prior week's total SPY dark pool premium and occurring near the market close. Although dark pool data doesn’t immediately reveal whether these prints are aggressive buys or sells, the sheer size and timing hint at imminent major moves. Indeed, SPY spiked sharply the next day and continued rallying. This order underscores the value of tracking institutional order flow. Large, aggressive trades by institutions can drive significant momentum and present high-conviction opportunities in the market.
Since that massive order, another equally massive dark pool print came in. Become a premium subscriber for more.