Much of the violence in the first moments after a data release comes from an empty order book. The news matters too, but the size of the first prints has a lot to do with how little was resting there to trade against. Understanding that makes the first candle easier to read.
Why the book thins
A market maker’s resting quote is a standing offer to trade at a set price. In the instant a number prints, that offer can be hit by someone who has read the release a fraction of a second sooner. The maker cannot win that race every time, so the sensible response is to step back before it starts.
In the seconds before a scheduled release, resting size shrinks and the gap between the bid and the ask grows. The bid-ask spread is a price for risk, and the risk is at its highest when everyone knows a jump is coming.
What the first prints mean
With little resting size, the first orders after the release move price a long way. Those prints are real trades. They are also trades in a thin book. Within a short time makers return, depth rebuilds, and price settles to a level that reflects the news with normal liquidity behind it.
That is why the first spike often overshoots and partly retraces. The retrace is depth coming back, and it should not be read as the market changing its mind about the data.
Options go wide first
An option quote depends on the price of the underlying and on implied volatility, and both are about to change. Option makers widen their quotes further than the underlying does. For a short time the midpoint of an option quote can be a poor guide to where it would trade, the same problem described in spreads that widen into the close.
Stops and market orders
A stop order becomes a market order when its level trades. In a thin book the next available price can be far from the stop level, so the fill lands well beyond it. The stop worked as designed. The book was not there to fill it nearby.
A market order sent in that window has the same problem from the other side. It takes whatever is resting, and what is resting is priced for the risk of the moment.
A release during the session
For data that prints before the bell, all of this happens in futures and the ETF opens after the worst of it. For releases inside the session, covered in the 10am releases, it happens in the ETF and its options directly.
Where NoVo fits
NoVo shows positioning and not the order book. The Trader dashboard maps net GEX, the gamma flip, the walls and the expected move on SPY, QQQ and IWM, and Dr. NoVo’s written reads describe where price sits once the book has refilled. The first seconds belong to the venue. The map is for the minutes after.