A classic shakeout for US equities following J Powell

A classic shakeout for US equities

A classic shakeout for US equities following J Powell and his testimony, but volume price analysis will tell you where the market is heading next.

00:03

Introduction to futures trading and volume price analysis

00:03

The webinar introduces the futures market and focuses on day trading using volume price analysis along with other tools. The presenter emphasizes the importance of understanding what to know before opening a trade. A risk disclaimer is highlighted, advising viewers not to trade with money they cannot afford to lose. The methodology discussed centers on analyzing the relationship between price action and volume to determine if market moves are genuine. Additional details and foundational concepts of this approach are available in a referenced book.

01:06

Using volume price analysis across markets and time frames

01:06

The speaker introduces a companion book available on Amazon that contains 200 chart examples covering stocks, indices, and commodities. The core principle emphasized is that chart patterns and market anomalies tend to repeat across different markets and time frames, allowing traders to recognize these patterns and gain insight. Understanding volume in relation to price action is crucial, as it helps identify anomalies that most traders miss, preventing them from being drawn into unfavorable trades. The market’s purpose is described as taking traders’ money quickly, but recognizing chart signals puts traders in control and helps avoid emotional pitfalls like fear of missing out.

03:07

The discussion shifts to the use of candlestick charts and patterns, which have become widely accepted in Western trading despite their long history in Japan. Alongside price action and volume, support and resistance levels are highlighted as essential elements in trading analysis. Once these basics are understood, traders can incorporate additional indicators, including proprietary ones developed by the speaker’s team. Various chart time frames and types, such as Renko charts, are also mentioned to suit different trading styles.

04:12

The speaker explains a comprehensive program for forex traders that combines technical analysis (volume price analysis) with fundamental analysis and related markets, creating a ‘3D approach’ to trading. This approach acknowledges that charts do not move in isolation but are influenced by economic releases and broader market conditions, such as risk-on or risk-off sentiments. Additionally, the interrelationships between the four main capital markets—forex, bonds, commodities, and equities—are emphasized, highlighting the importance of understanding these dynamics, especially when trading indices.

06:04

Focusing on trading indices, the speaker notes the importance of monitoring stock market trends and their current influences. Despite some technical difficulties with equipment, the intention is to analyze relevant market conditions. The segment underscores the interconnectedness of markets and the need for traders to stay informed about broader market movements to make better trading decisions.

06:41

Impact of Jay Powell’s testimony on market volatility

06:41

Jay Powell is testifying before the Senate Banking Committee in a two-day session, which started yesterday. His speech, as well as any Federal Reserve communication, can cause significant market volatility and even reverse market trends, as seen from yesterday’s market reaction.

07:10

The Nasdaq (NQ) has experienced a sharp sell-off driven by multiple factors including rising bond yields and inflation fears. This combination is causing increased market fear and downward price pressure on faster timeframes. Day traders need to be proficient in chart reading and Volume Price Analysis (VPA) to anticipate market moves effectively.

08:21

Understanding the broader market narrative is essential, especially for trading indices like the Nasdaq, which is tech-heavy. Key drivers such as stimulus money pumped into growth stocks have influenced the market. Recently, the market has become fragile and pulled back, as highlighted by VPA. In contrast, the Dow, composed of 30 stocks, has shown a different response due to its more value-oriented composition.

09:33

A solid grasp of the difference between value and growth stocks is important to complement technical analysis. Additionally, bond market dynamics play a role: as bond yields rise, bond prices fall, which can further impact equity markets and trading strategies.

10:04

Relationship between bond yields, stock market, and interest rates

10:04

The segment explains the relationship between rising bond yields and increasing interest rates, highlighting how this affects the cost of borrowing money. It discusses the impact on sectors like financials, particularly banks, which profit from interest rate changes. The speaker notes that bond yields and stock markets can rise together up to a point before stock markets start to decline while bond yields continue to rise, signaling higher borrowing costs for businesses.

11:08

This part emphasizes the importance of monitoring broader market risks and investor sentiment, such as complacency or fear, when trading various assets like forex or indices. It stresses that understanding these relationships takes time and experience. The speaker introduces a chart to illustrate these concepts and prepares to discuss how central banks respond to market conditions.

12:08

The discussion turns to central banks’ challenges, particularly the Federal Reserve’s dual mandate to manage employment and inflation. The pandemic’s impact on jobs complicates raising interest rates, which can slow economic expansion. Central banks try to balance these factors, but market forces often behave unpredictably. The speaker notes that since the financial crisis, stimulus programs have inflated stock prices, sometimes beyond sustainable levels.

13:23

Here, the focus is on the bond market’s role as an indicator of market sustainability. Despite central banks’ previous control, rising bond yields now signal growing concern. The speaker references a Bloomberg article illustrating central banks’ fears about bond market movements. They also mention the rising trend in commodities, including soft commodities and oil, suggesting the beginning of a commodity super cycle that could drive inflation higher.

14:26

This segment explains that rising commodity prices contribute to inflation, increasing the cost of goods and money. However, central banks and the public often have differing views on what drives inflation. For example, food price increases, which heavily impact consumers, are not given the same weight by central banks when setting policy. This difference creates challenges in accurately assessing the inflationary environment.

15:28

The speaker elaborates on the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) index, which differs from everyday consumer experiences. They highlight the complexity of integrating various economic factors into trading decisions. The segment concludes by mentioning a book on forex trading that covers these concepts and references current market conditions, including analyzing daily charts and candlestick patterns on the YM (Dow Jones futures) in a pre-market session.

16:46

Analyzing candlestick patterns and support/resistance levels

16:46

The speaker analyzes candlestick patterns, particularly a possible hanging man candle with significant volume, noting the presence of many doji candles indicating market indecision rather than a clear reversal. Support levels are discussed, focusing on a key support around 31,340-31,341, identified using the Camarilla method. Despite wicks dipping below this level, it remains the primary support for the week.

18:36

The importance of the third and fourth Camarilla levels is highlighted, framing the current price action within a broad congestion range between R3 resistance and S3 support. Volume-based resistance at the volume point of control (VPOC) is also noted as a potential reversal point. Market direction hinges on upcoming developments, particularly comments from Jay Powell and the interaction of bond yields and commodity prices.

19:48

The market is currently capped at a resistance level of 31,570, awaiting further movement influenced by Powell’s statements. The speaker emphasizes the need to integrate technical analysis with broader market factors, including the employment market and interest rate policies. The segment concludes with a shift to currency futures analysis, introducing various currency pairs on trading platforms such as NinjaTrader and TradeStation.

21:03

Strong dollar movements affecting currency futures

21:03

The speaker explains the strong movement in the US dollar index coinciding with the US market opening at 1 PM local time. This pattern is common during major market sessions, such as the London and US opens. The dollar’s strength is reflected in various currency futures, with the dollar rising sharply while currencies like the Australian dollar, British pound, Canadian dollar, euro, yen, and New Zealand dollar are selling off. This highlights the dollar’s dominant influence across currency futures markets.

21:58

The discussion focuses on volume and price action in currency futures, emphasizing a classic example of a rising dollar accompanied by increasing volume. The speaker points out a significant price waterfall and explains that rising volume under a rising market signals strong buying effort. Similarly, a rapid downward move requires heavy selling volume. This volume-price relationship confirms the strength of the current trend and helps traders identify potential reversals.

23:28

The speaker elaborates on the importance of volume profiles during trending markets, noting that rising volume supports the ongoing move. They describe how effort (volume) is needed to push prices against natural resistance (gravity). The trend monitor confirms sustained upward momentum in the dollar. The trading platform used allows quick multi-timeframe analysis, which is essential for tracking volatile moves. The current strong dollar move precedes a significant speech by Jerome Powell, increasing the likelihood of volatility and possible reversal.

25:10

Ahead of Powell’s speech, the market exhibits strong volatility and a robust dollar buying trend. The speaker discusses how markets often react ahead of major news releases without having concrete information, leading to sharp moves that frequently reverse after the event. This pre-release activity is attributed to market makers capitalizing on short-term price swings. The behavior is likened to patterns seen during other major events like non-farm payroll releases, where initial market moves often contradict the ultimate direction.

26:38

The focus shifts to the British pound, which is experiencing heavy selling while the dollar continues strong buying. The speaker highlights the advantages of analyzing interrelated currency futures within a complex, providing deeper insights into market dynamics. Observations on the five-minute euro dollar chart show a volatility trigger due to a large candle and high volume, suggesting an imminent pause, bounce, or reversal in price action.

27:31

With the volatility trigger signaling potential market congestion or reversal, the speaker advises closing profitable positions to avoid adverse moves. This indicator provides timely exit signals, helping traders protect gains. Additionally, comparing volatility signals across related currency pairs offers a broader market perspective, highlighting differing conditions and potential upcoming moves. The approach underscores the importance of cross-market analysis and understanding intermarket relationships to inform trading decisions.

28:50

Market shakeouts and volume analysis on major indices

28:50

The speaker analyzes recent market volatility and volume patterns, highlighting a significant shakeout where large operators used news-induced panic to accumulate stock by driving prices down and then reversing the market. This classic trap maneuver aims to frighten sellers and buy heavily at depressed prices. The expectation following this activity is a period of consolidation followed by a likely reversal and recovery to previous levels, emphasizing the importance of daily charts for market perspective.

30:14

Focusing on the S&P 500 (ES), the market experienced a plunge followed by a recovery, closing near the opening price despite high volume. This suggests the predominance of buying by major players rather than selling, as heavy selling would have pushed the close lower. The market makers’ buying indicates a probable short-term recovery. However, the YM (Dow futures) shows divergence, not following the same pattern, highlighting market fragility at higher levels.

31:13

The market’s fragile state is described visually as half of an arched bridge, representing a narrowing price spread and falling volume during rising prices. This creates a flattened, catenary-shaped curve instead of a steep upward trend. The falling volume alongside this price action indicates weakening momentum. Nevertheless, recent buying after a market crash suggests support at current levels, with future movement depending on index-specific factors, especially in the YM, which behaves differently due to its unique composition.

32:29

The analysis shifts to the potential for market recovery following a shakeout, illustrated by a price waterfall and increased volume. Key support is identified at the volume point of control (VPOC), where the heaviest volume concentration exists, creating a natural barrier to further declines. This area also corresponds to a thick accumulation/distribution indicator line, tested multiple times, signaling strong support and the likelihood of a congestion phase rather than a sharp breakdown.

33:52

Further explanation of the VPOC’s significance is provided, emphasizing that this price level represents a large volume of old and new orders, causing the market to consolidate rather than slide through. This effect is consistent across related markets such as the YM, ENQ, and ES, each showing their own VPOCs. Traders are advised to be patient, awaiting either the end of congestion or a volume-confirmed breakout away from these control points, highlighting the critical role of volume in validating market moves.

35:43

Commodity super cycle and inflation implications

35:43

The speaker discusses a super cycle emerging in commodities, highlighting a bullish trend in oil, which has steadily risen from a plunge to around $60-$62 per barrel. They also analyze soft commodities like soybeans, corn, and wheat, showing an extensive bullish cycle that has persisted since the start of the year. If prices break higher from the current volume point of control, further gains are expected across these commodities.

37:07

The discussion shifts to gold as a potential major beneficiary of inflation, although it is not yet showing strong bullish movement. The speaker compares the smooth price action of large futures contracts to the more volatile micro contracts, explaining how volume and price patterns provide signals. They introduce the concept of volatility triggers, indicating potential reversals or congestion in price movements, which can be observed in real time on various time frames.

38:28

An analysis of market volume shows a rally accompanied by falling volume, signaling caution. The speaker notes a volatility trigger with significant volume, suggesting that big operators are involved and a reversal or congestion is likely. They emphasize the importance of monitoring volume trends and price action on short time frames to decide when to exit and potentially re-enter the market.

39:19

Further examination of one-minute and three-minute charts confirms the presence of volatility traps with rising volume, indicating that large market players may be attempting to trap traders before reversing or stalling price movements. The speaker advises waiting for clear signals before re-entering and highlights the bearish trend supported by volume price analysis (VPA) and trend monitors.

40:13

Trend monitors across various time frames remain predominantly bearish, reflecting a market influenced by the direction of the U.S. dollar. A rising dollar generally correlates with falling commodity prices. The speaker reviews the current dollar movement, noting a recent pause after a strong rally, and sets the stage for analyzing volume through time and sales data to assess real market activity.

41:07

Time and sales data is used to track executed futures contracts, focusing on significant block trades over 20 or 30 contracts that signal meaningful market interest. The speaker explains the importance of observing how the market reacts to these large blocks to gauge bullish or bearish sentiment, while smaller trades are deemed less consequential. This approach helps in understanding real volume flow and market dynamics.

42:02

The speaker reviews the current state of the indices, particularly the YM, noting a sideways market with low volatility. They suggest that during quiet market conditions, traders should move to faster time frames to find trading opportunities, emphasizing the need to adapt strategies based on market activity levels.

42:30

Renko charts and interpreting anomalous volume patterns

42:30

The speaker explains the significance of an anomalous candle with high volume but little price movement, likening it to driving a car on an icy mountain where effort increases but progress stalls. This indicates intense selling pressure despite the large volume, suggesting that the price is unlikely to rise further and may move sideways or decline.

43:49

The discussion focuses on the price trading around the volume point of control with breached resistance but little support below. The price is expected to fluctuate within this range, potentially breaking down quickly through low volume nodes to subsequent support levels, which include clusters of price-based support.

44:49

The host introduces the MT4 platform as an alternative to NinjaTrader for futures trading, noting that while futures contracts require significant capital, many brokers offer synthetic versions of futures accessible through forex brokers. The MT4 platform provides similar price action and volume data to futures charts, facilitating analysis despite minor differences.

46:05

The speaker compares different trading platforms like MT4, MT5, and TradingView, explaining the availability of various time frames and charting options. They highlight how demo accounts with reputable brokers allow free access to these instruments and emphasize the use of Camarilla levels, which calculate daily support and resistance differently across time frames, especially on hourly charts.

48:03

The importance of confluence between different time frame support and resistance levels is explained, where overlapping levels increase the likelihood of price pausing or reversing. The segment also introduces a custom Renko chart indicator for MT4 that provides a clear, wickless view of price trends and congestion phases, making patterns like double tops more visually evident.

49:54

The speaker analyzes a double top pattern formed due to volume and price resistance, noting the price’s return to the volume point of control before market open. They explain the concept of low volume nodes, where price can move quickly through thin volume areas, and thicker volume areas that act as cushions, affecting price momentum and potential volatility triggers.

51:02

Volatility triggers are described as moments when rapid price movement causes traders to fear missing out, often leading to problematic price swings. The segment highlights the use of trend indicators on Renko charts combined with time frame volume analysis to identify potential trades, particularly when price approaches key support or resistance levels confirmed by volume.

52:13

The segment discusses related markets, specifically the Aussie Yen currency pair, as a proxy for market risk sentiment. The yen and Swiss franc are considered safe havens, while the Australian dollar reflects commodity exposure and risk appetite. Divergences or alignments in these proxies can signal broader market sentiment shifts, aiding in interpreting price movements on indices like the Dow.

53:57

The speaker examines price support and resistance on Renko charts, noting a significant resistance level on the S3 pivot that has historically caused reversals or pauses. They observe that while the Dow may pause or move lower, Renko charts indicate underlying price support, emphasizing the need to monitor ongoing price action for confirmation.

55:46

A volatility candle triggered by rapid price movement through a low volume node is discussed, highlighting how such moves often retrace back into the previous price range rather than continuing downward. The speaker emphasizes patience in waiting for confirmation and explains how volume price analysis (VPA) and Renko charts help track such developments and manage trade decisions.

57:31

The final segment covers technical details of Renko chart settings, explaining that users can set fixed brick sizes or use the ATR function for dynamic adjustments. The indicator remains at the set value until manually changed or refreshed. The speaker also notes the absence of a link for local time display on MT4 and suggests users refresh the indicator as needed.

58:05

Combining time-based and non-time-based charts for momentum analysis

58:05

The speaker discusses using Renko charts combined with time-based charts to analyze market movements, highlighting the dollar’s strong rise and yen buying. They explain how multiple Renko charts on different time frames provide clear price action insights. The charts run on tick equivalents, offering a unique way to monitor momentum independent of time.

59:09

The discussion continues on price action using trend dots and a trend monitor that shows transitions in market trends with color changes. Volume price analysis (VPA) is applied to observe buying activity and reversals, noting volume is declining and the dollar has slightly retreated, suggesting a potential bounce. Strong yen buying on a three-minute chart explains recent market moves.

59:56

The speaker emphasizes the flexibility of Renko charts, which can be set to any time frame and reset periodically to capture fresh price action phases. They highlight how Renko charts reveal market momentum better than time-based charts because bricks form based on price movement rather than time, allowing rapid visualization of fast market activity.

01:00:54

Renko charts build bricks according to the speed of price changes, producing rapid visual signals during fast markets, similar to a gatling gun effect. VPA can be applied alongside to enhance analysis. The speaker notes the strong yen and dollar movements, and mentions that market dynamics will shift approaching the upcoming PAL event. This approach is powerful for scalping across markets.

01:01:46

Closing remarks cover where to find the indicators used, noting the licensing covers both NinjaTrader 7 and 8 platforms, allowing traders to switch between them easily. A different download is provided for each platform due to coding differences. The speaker briefly mentions MT45 and confirms the licensing and indicator availability for users.

01:02:17

Overview of trading platforms, indicators, and education programs

01:02:17

The speaker explains how users can manage their subscriptions and access trading indicators through their user dashboard on TradingView. They mention upcoming indicator releases that will be included for existing subscribers even as the full package price increases. The discussion also covers two versions of TradeStation: TradeStation Global, which uses Interactive Brokers as a feed, and TradeStation Securities, which relies on its own feed. Both platforms are described as powerful, especially with the RadarScreen feature, and have been well received by users.

01:03:10

Information is provided on where to follow Anna, including her website and Amazon for books available in Kindle and paperback formats. The speaker introduces the Complete Forex Trading Program offered at QuantumTradingEducation.com, which covers spot and futures markets. Additionally, there is a funded trading program exclusively for students, allowing them to trade with up to two million dollars of firm capital. Students start with an evaluation account funded with $5,000, $10,000, or $15,000, and upon meeting achievable consistency targets, their funding is increased fourfold.

01:04:07

The funded program details continue, explaining that once a student reaches the target on their initial funded account, the capital is scaled up progressively from $10,000 to $40,000, then doubling and increasing further up to $1 or $2 million. Students earn 50% of the profits as monthly payouts as a reward. The speaker concludes by summarizing where to find all relevant resources and thanking the audience for attending.

01:04:35

The session wraps up with thanks to the participants, encouragement to enjoy the rest of the training, and well wishes for safety and health until the next meeting.

By Anna Coulling – creator of volume price analysis