Big risk events now on the horizon as we approach the end of the year… and a great trade in gold!

A Great Trade In Gold!

There are several major risk events now facing the financial markets as we approach the end of the year, and in this video, we highlight this unique confluence of events, which could lead to not one, but perhaps two black swan events in the coming months. We will see.

In the meantime, we also focus on a terrific move on gold, which saw the precious metal end the session with a wide spread down candle and a strong trend lower, which truly delivered. Within the move, there were the usual pullbacks and reversals but volume price analysis helped to determine whether these were indeed primary reversals, which they were not, and therefore simply secondary trends reversing against the primary bearish trend lower.

00:01

Webinar introduction and session overview

00:01

The speaker welcomes everyone to the afternoon webinar, apologizing for the brief delay caused by a barking dog. The session will cover indices, some commodities, and a brief look at the forex market.

00:30

Trading disclaimer and volume price analysis intro

00:30

The speaker begins by noting recent strong movements in the dollar and British pound. They emphasize the importance of a trading disclaimer, reminding viewers that trading carries risk and to never use money they cannot afford to lose. The session focuses on analyzing charts using volume price analysis, which involves examining price action alongside the supporting volume. This method helps determine whether a market move is genuine or potentially a trap by checking if price and volume confirm each other or present anomalies.

01:30

Volume price analysis benefits and resources

01:30

The webinar discusses the importance of volume as an indicator that validates what traders see on price charts, emphasizing that most traders rely on price action. It references books available on Amazon that explain the basic concepts of volume price analysis, including versions for forex and other markets. The material includes about 200 examples across various time frames and markets such as indices, stocks, and commodities, highlighting that market patterns and human behaviors tend to repeat.

02:36

The speaker explains how market makers and manipulators trigger traders’ emotions, and volume price analysis helps identify these moments to avoid being misled. Recognizing repeating candle patterns and anomalies builds confidence and consistency in trading. The speaker introduces their trading platform setup using MT5 to analyze indices, mentioning futures contracts and encouraging viewers to check broker compatibility.

03:52

The discussion covers the increasing accessibility of markets for retail traders compared to the past, explaining that synthetic contracts offered through brokers reflect futures and cash market activity. Traders can apply volume price analysis and custom indicators to these contracts. The speaker demonstrates using multiple time frames including Renko, 3-minute, 10-minute, and hourly charts, while a colleague uses NinjaTrader to view actual market data.

04:53

Market sentiment and current global issues

04:53

The speaker discusses the current market sentiment amid various global challenges including earnings season, elections, the ongoing virus situation, stimulus debates, Brexit, and a potential black swan event. They believe the market is highly skewed and volatile, suggesting a major sell-off may be imminent. Although some signals have appeared, it is still early to predict the exact timing.

06:12

There are almost no short sellers in the market as prices keep rising, which often precedes significant market moves. October is traditionally feared due to historical crashes like the Wall Street Crash and the 1987 crash, though statistically, other months like September have seen more corrections. These past crashes remain deeply ingrained in traders’ and investors’ minds, contributing to market anxiety.

07:15

The current global situation is described as chaotic and conflict-ridden, with geopolitical flashpoints and societal disagreements about government responses to the virus. This confusion and turmoil create an unstable environment. The speaker and a colleague agree that significant changes are inevitable, though the exact nature of these changes remains unknown. The future market landscape is expected to differ substantially from the pre-virus period.

08:23

Given the uncertainty and instability, traders must focus on chart opportunities and adapt to the changing environment. Increasingly, more people may enter the markets as they offer a way to potentially generate income despite broader economic challenges like employment impacts from the virus.

08:59

Market distortions and options trading impact

08:59

The speaker discusses current market events, including Apple’s upcoming iPhone launch and Amazon Prime Day, noting unusual market behavior with rising stocks and volatility indices, which is considered a distortion influenced by central bank quantitative easing. A significant influx of retail traders is impacting the options market, especially through the use of options to speculate on expensive stocks like Amazon. The introduction of weekly options, which did not exist previously, has increased market participation and complexity.

11:10

The speaker explains that irregular behavior in the options market can serve as an important signal for broader market conditions. Various indicators such as short sellers exiting, rising stocks and volatility indices, and unusual chart patterns suggest underlying market tensions that may not become apparent immediately. The discussion closes with a note on forex trading, mentioning that the British pound remains heavily influenced by Brexit, and referencing tools available on investing.com for tracking currency pairs like GBP/CAD and GBP/USD.

12:20

Forex volatility and Brexit implications

12:20

The speaker explains how to assess currency pair volatility by examining implied volatility in the options market. With Brexit approaching a key deadline on October 15th for a potential EU-UK deal, the implied volatility has risen from previous levels, reflecting market anticipation of increased uncertainty. Despite contradictory statements from both sides about the likelihood of a deal, the options market suggests moderate volatility, currently around 13 to 14 percent.

13:25

The implied volatility is expected to increase further, especially if no progress is made by the Brexit deadline, potentially rising into the 20s. This method of gauging volatility is applicable across various currency pairs, such as the euro-Canadian dollar pair, which currently shows a lower overnight implied volatility of eight percent. The speaker also notes recent fundamental news events, including the Consumer Price Index (CPI) report, which met expectations, and mentions using financial news sources like Financial Juice for timely updates.

14:33

Upcoming events include a speech by Bank of England Governor Andrew Bailey and other market actions such as auctions, Federal Reserve speakers, and the US federal budget release. With most fundamental news already accounted for, focus shifts back to ongoing issues like elections, the coronavirus pandemic, stimulus measures, potential unexpected events, and corporate earnings reports.

14:59

Gold market analysis and volume price details

14:59

The speaker begins by discussing a significant sell-off in gold, highlighting the sharp price drop within a single session that erased gains made over three days. Despite personally favoring gold’s rise, the speaker emphasizes the profitable trading opportunities on the short side, illustrating the contrast between steady upward movements and rapid downward price action.

16:03

The speaker explains that historically, about 75-80% of their trading positions have been short, reflecting the frequent and rapid downward movements in the market compared to slower upward trends. They examine the three-minute chart showing local time and note important market activity around fundamental news releases and cash market openings, observing a trap move where the market initially rises before a strong sell-off with volatility triggers marking the decline.

17:04

The analysis focuses on volume indicators showing a dominance of selling pressure over buying, with volume falling during attempted rallies. This signals weak reversals and a continuation of the bearish trend. The speaker stresses the importance of interpreting volume and price action to distinguish between minor pullbacks and full trend reversals, which is key to maximizing trading profitability.

18:29

Continuing the volume-price analysis, the speaker points out that volume falls significantly during rallies, reinforcing the bearish trend. The trend monitor confirms this by showing no transition toward bullish behavior, indicating the market remains in a downtrend. Support and resistance levels are identified, along with volatility triggers, showing how the market tries to rally but fails to gain strength, maintaining downward momentum.

19:57

The speaker details the stepped downward transitions marked by heavy volume and volatility triggers, highlighting how market makers and large operators influence price action. Although the trend monitor briefly signals a potential bullish reversal, it quickly reverts to bearish, supported by weak volume in attempted rallies. This confirms the continuation of the primary downward trend despite minor upward moves.

21:25

The speaker discusses trading time frames, noting that while sub-one-minute trading can be profitable, it requires quick decision-making and is not suitable for everyone. They recommend using very fast time frames primarily when slower charts show congestion. In contrast, during strong directional moves like the current gold sell-off, slower time frames such as one, three, or five minutes are more appropriate for trading. The segment ends with an examination of the ten-minute chart, revealing volatility and volume patterns consistent with the ongoing trend.

22:20

Breakout trading and stop loss strategies

22:20

The speaker explains the concept of congestion breaking down in the market, focusing on strong resistance levels that the price struggles to penetrate. They highlight a cluster of multiple price levels that form a robust barrier, tested several times, creating a significant area of accumulation and distribution. This cluster is crucial for breakaway traders as it defines clear breakout regions and provides a well-defined area to place stop-loss orders. The presence of these levels means that if the market retraces, it must overcome substantial price-based resistance, requiring significant volume to push higher against prevailing bearish sentiment. The segment emphasizes the advantage of trading breakouts and breakaways with clearly defined entry and stop-loss points.

By Anna Coulling – creator of volume price analysis