What is SOPR and why is it important?

First SOPR is Spent Output Profit Ratio which is an 'on Chain indicator' used to determine is the sell-off / correction has ended. I point it out as POMP mentioned it during an interview last week and my slow brain picked it up as something I need to study and learn more about!

SOPR is a technical indicator used by traders to indicate which direction the market is moving.

2-forms of SOPR:

• Short-term - indicates if the current correction is close to or has already reached its end.
• Long-term - indicates if the current correction has legs to go higher or if a cliff is near

How does this work? this is done this by measuring the variation between sale and purchase price. Which is used to measure for the profit and loss in the overall market for each transaction. 

What values is important? When SOPR is higher than 1, it means that on average, market participants are selling at a profit. The opposite is true when SOPR is lower than 1.  What exactly is a value used by traders to enter or exit the market?  I don't yet understand to that detail.

Sub-value of aSOPR also exists and appear to be used to filter out market noise and provides a more accurate direction.

Traders also utilize a 1-hour and a 3-hour SOPR value to determine smaller movements to place trades

FYIW, that current SOPR value is 1.03 which based upon above indicates the current Bull Market is intact and to continue to see new money flow into the market driving prices back up.  

Summary - last week probably shook out some weak hands and that allowed stronger hands to reinforce their positions.  Which were you?