Friday is an important day for Tesla with the re-balancing of the indices

Friday is an important day for Tesla with the re-balancing of the indices

One of the most interesting weeks ahead with Tesla joining the S&P 500 index and an event that is likely to cause a volatile reaction in the US markets on Friday as the indices are rebalanced.  In this video, we explain the background, what you need to understand, and why this happens, and of course, with the Quantum Trading indicators, you have the perfect tools to take advantage.

00:00

Webinar introduction and disclaimer

00:00

The webinar begins with a lighthearted apology for the delayed start due to some confusion between the hosts. The speaker thanks attendees for joining and introduces the session, which will cover general market trends and currency futures. Viewers are reminded of the trading disclaimer, emphasizing the risks involved and advising not to invest money they cannot afford to lose. The speaker also notes the presence of new participants and reassures them about the content to be covered.

00:56

Volume Price Analysis explained

00:56

The speaker introduces volume price analysis (VPA), a method that combines price action with volume data to validate chart movements. Unlike traditional price analysis that relies on candles and patterns, VPA helps distinguish genuine price moves from anomalies by examining volume. An example is given of a student trader who, despite hesitation from price analysis alone at a Fibonacci support/resistance level, gained confidence to take a long trade because the volume was diminishing on down candles, signaling an anomaly rather than a true price drop.

02:43

The speaker mentions a book that explains the concepts behind volume price analysis, emphasizing that it is not a new methodology. They also reflect on their experience during lockdown, noting the positive aspect of living in a beautiful location despite being unable to see family.

03:13

Historical research on trading methodologies

03:13

The speaker discusses studying historical trading techniques from notable traders such as Livermore, Wyckoff, and WD Gann. They emphasize that the concepts of volume and price analysis have been around for a long time but are now more accessible due to modern market access. Volume is highlighted as a powerful indicator to validate chart movements, useful in combination with other tools like Gann angles, Fibonacci, and moving averages.

04:57

The speaker reflects on their research and continuous learning about volume price analysis (VPA), mentioning a book with 200 real-world examples across markets and timeframes. They note that different traders use various proprietary indicators developed from VPA studies, including those used by quantum trading users. This inspires ideas for future webinar topics to further explore these concepts.

06:08

As this is the last webinar of the year and series, the speaker thanks participants and shares personal reflections on receiving many emails, including from individuals in the American penal system who use the books to improve their lives by learning market dynamics. The speaker expresses humility and well wishes for their success.

07:08

The speaker discusses integrating various trading methodologies such as Elliott Wave, Gann angles, Fibonacci, moving averages, and MACD, stressing the importance of understanding each indicator’s role in the price cycle. They advocate using volume as a validation tool to significantly enhance trading and investing results.

08:25

The speaker explains the development of specialized indicators for multiple platforms like MT4, MT5, TradingView, NinjaTrader, and TradeStation. These include an accumulation and distribution indicator that provides insights when price approaches key levels, as well as a Camarilla indicator which helps prioritize support and resistance levels to better anticipate market moves.

09:03

Market events: Biden presidency and FOMC

09:03

The speaker discusses significant levels in analysis, referencing Fibonacci and volume. They mention a recent important date, the 14th, when the Biden presidency was confirmed by the Electoral College, marking the transition phase despite ongoing political tension and division in society.

09:33

The confirmation of Biden’s presidency is highlighted, with the transition expected to complete by January’s inauguration. The speaker acknowledges societal divisions and hopes for a more stable and sane world in 2021.

10:09

The speaker points out upcoming key dates, particularly the FOMC meeting tomorrow. They note that with Biden’s victory, Janet Yellen is expected to become Treasury Secretary, a development with implications for Federal Reserve policy and stimulus measures.

10:46

Janet Yellen’s close relationship with Fed Chair Powell is mentioned, suggesting potential impacts on stimulus decisions. The discussion includes where stimulus funds might flow, noting that so far, money has predominantly entered the stock market.

11:21

Current market conditions are described, with futures up and key levels like the 30,000 mark on the Dow Jones Industrial Average remaining critical. Despite ongoing virus challenges, optimism is tied to vaccine progress and the political certainty brought by Biden’s confirmed presidency.

12:01

Tesla joining S&P 500 and index rebalancing

12:01

The speaker discusses the recent removal of a market factor and shifts focus to Tesla’s upcoming inclusion in the S&P 500, highlighting an important article explaining its implications. The segment explains index rebalancing, which happens periodically when companies are added or removed from indices, affecting market sentiment. The speaker emphasizes that indices are often shorthand for market sentiment but require deeper understanding, especially for day traders who need to know the companies and sectors involved.

13:44

The discussion continues on the impact of rebalancing, particularly with Tesla’s entry into the S&P 500, which can significantly influence price movements. The speaker notes the frequency of rebalancing for different indices like the S&P (four times a year) and the Russell indices (once a year). They stress the importance for traders to be aware of these dates and the changes to anticipate, as many investors passively buy indices without considering these shifts.

15:34

Attention shifts to the complexity of day trading, which has evolved beyond charts and news to include awareness of options markets and their influence on cash markets. The Tesla rebalancing is described as the biggest in history, involving $80 billion in Tesla shares being added and a corresponding sell-off of other S&P 500 stocks. The speaker recaps that despite recent market volatility, the election is resolved, and key upcoming events include the Federal Reserve meeting and Tesla’s inclusion on Friday, which is expected to mark a significant turning point.

17:22

The speaker briefly mentions trading activity expected to taper off after Friday and reflects on the transition from 2020 to 2021 with Tesla’s S&P inclusion as a milestone. The segment ends with a quick note on current challenges in currency futures trading, particularly for the British pound (Cable), indicating ongoing market difficulties.

17:15

Currency futures and volume price analysis

17:15

The speaker discusses technical issues with their setup, then explains that currency futures and spot markets use the same volume price analysis approach. They emphasize reading volume alongside price action, highlighting the importance of support and resistance levels measured through volume analysis.

18:46

The accumulation and distribution indicator is introduced as a tool to identify support and resistance levels, with thicker lines indicating stronger levels. The speaker compares camarilla levels to Fibonacci levels, noting that volume-based support and resistance are reflected in volume histograms by high and low volume nodes, which show where price spends the most time.

19:54

The concept of the volume point of control is explained as a sign of sideways price movement. The speaker notes that prices tend to move quickly through low volume nodes due to weak volume support. They also highlight that strong volume nodes act as resistance or support, and any significant price movement requires increased volume activity.

21:08

The speaker imports a currency strength indicator from the spot market to analyze the British Pound against the US Dollar on different timeframes. They observe sideways movement on the 10-minute chart and note that a volume increase is needed to push prices higher, emphasizing the role of volume as both a price action and support/resistance metric.

22:21

The importance of using a news calendar or feed is stressed to stay informed about market-moving events, such as political developments, virus updates, and economic fundamentals. The speaker recommends Financial Juice as a competitively priced news source for independent traders, highlighting the value of timely and affordable market information.

24:10

Using news feeds and market sentiment

24:10

The speaker introduces a trading update tool that provides an overview of market sentiment, highlighting what has been bought or sold. They review the current market indices, noting a slight rise in one and a dip in the Nasdaq. Emphasis is placed on volume as a key indicator to validate chart movements, with anticipation of the 6B possibly creeping higher.

25:14

The discussion focuses on price levels acting as potential targets, specifically the R4 level, which the price has attempted to reach twice but failed. The speaker explains that these levels update differently depending on the timeframe, with some refreshed hourly and others weekly. They expect another attempt at the R4, considering the balance of probabilities based on price analysis.

26:18

Volume analysis is used to interpret price action around the R4 resistance level. Despite two failed attempts to break R4, the volume underneath the price candles is not strong enough to confirm a breakout. The speaker notes that the presence of resistance and the volume patterns suggest a likely short position, but also points out anomalies that might affect this expectation.

27:28

The speaker observes inconsistencies between price action and volume, indicating an anomaly that could lead to another rise toward the R4 level. Different timeframes have slightly different R4 levels, with the 10-minute chart showing a closer R4 than the hourly chart. Increasing volume is needed to confirm a move, and positive divergence between the pound and dollar suggests movement in the right direction despite overall congestion.

29:08

The session concludes with thanks to the audience and encouragement to ask questions about the material covered. A link to a CNBC article about Tesla is shared as relevant information for stock traders. The speaker wishes everyone a good holiday season and passes the conversation to David, who begins by acknowledging ongoing market congestion and potential movements.

30:40

Market overview and trading indicators analysis

30:40

The market shows tentative behavior with the three indices and Apple stock being key drivers, especially the Nasdaq (NQ). Despite positive news on Apple causing some rallies, the overall tone is bearish with four consecutive days of losses. The Russell 2000 (IWM) and S&P 500 (ES) are leading the downward trend, dragging the Nasdaq down. The short-term trend monitor on the five-minute chart confirms a growing bearish sentiment across these indices.

32:11

Analyzing the YM futures on multiple time frames from 15 seconds to 15 minutes reveals a developing bearish trend with strong resistance levels holding back rallies. Price has broken below previous support levels now acting as resistance, with volume and accumulation/distribution indicators confirming selling pressure. The electronic Globex market shows manageable volume patterns, with expectations of increased volume once the cash markets open, leading to more pronounced price action.

34:16

Volume Point of Control (VPOC) and accumulation/distribution indicators highlight key support and resistance levels, with some levels tested multiple times gaining strength. Recent volatility caused price to retreat within a defined range, moving towards the Camarilla pivot points. The YM is currently in a congestion phase between resistance and support zones, while Apple stock’s strong pre-market rally and volume surge earlier helped drive the Nasdaq but is now showing signs of rolling over, impacting overall market sentiment.

36:19

Apple’s dominance in the Nasdaq means its price action heavily influences the index. After a significant gap up and volume-driven rally, Apple is starting to weaken, causing pressure on the Nasdaq. Day traders are likely taking profits, and volume analysis shows the price breaking away from the volume point of control with weak rallies. The overall market is trading in a narrow, congested range, with the indices showing hesitant and uneven price movement, emphasizing the importance of using faster time frames for trading these conditions.

39:36

Market price action remains choppy and confined within a narrow range. Using very short time frames like 15-second charts reveals tradable patterns and reversals supported by trend monitors and volume point of control shifts. Stronger support and resistance levels are identified by thickness and testing frequency on volume-based indicators. The congestion between these levels offers clear entry and exit points, as well as defined risk management zones, highlighting the utility of combining volume and price analysis for intraday trading.

41:06

Volume point of control acts as a focal area for congestion as it represents the highest traded volume price level. Price tends to move slowly around this area but moves rapidly through low volume nodes. This creates narrow channels of support and resistance that traders can use to manage trades effectively. On the five-minute chart, resistance ceilings cap price action, and attempts to rally remain weak, reinforcing the current bearish sentiment. These volume and price indicators work together to provide precise trading levels and improve decision making.

43:15

Tick charts are introduced as an alternative to time-based charts, capturing momentum more effectively by closing bars after a set number of transactions rather than a fixed time. This allows traders to see rapid moves and momentum that time charts may smooth over. Trend dots and trend monitors on tick charts provide early signals and confirmation of trend changes, with the dots reacting quickly to price action and the monitors confirming later. This dual-indicator system helps manage entries and exits in fast-moving markets.

45:37

Trend dots lead the trend monitor in signaling trend changes, offering early alerts for traders. During congestion phases, trend dots move within candle bodies and respond sensitively to reversals, while the trend monitor confirms these changes more conservatively. Volume levels falling away reduce resistance, aiding upward moves, although some resistance zones remain challenging. The interaction of these indicators provides a balanced view of momentum and trend strength, helping traders navigate uncertain market environments with minimal stress.

47:31

Resistance clusters, where multiple strong levels coincide, create significant barriers to price advances. The accumulation/distribution indicator reflects these ceilings, repeatedly capping rallies. Tick speedometers optimize tick chart settings for various instruments and times, ensuring trading occurs at the most effective pace. Areas with low volume or low participation, indicated by red zones on speedometers, are less favorable for trading. Consistent volume and price analysis across multiple time frames confirm market conditions and assist in identifying tradable opportunities.

49:47

Speedometers dynamically adjust optimal tick chart settings based on current market activity, guiding traders on appropriate chart configurations. Time-based charts are revisited to compare with tick and Renko charts, emphasizing the importance of non-time-based charting methods like Renko for intraday scalping. Renko charts with point bricks optimized for instruments like the YM futures offer clear price movement representation and reduce noise. Combined with volume price analysis and trend indicators, this approach simplifies trading and improves clarity in volatile markets.

52:15

The integrated system of volume price analysis indicators—including trend monitors, trend dots, volume point of control, and accumulation/distribution—provides a comprehensive framework for trading. Trend dots offer early signals, with trend monitors confirming trend changes, reducing stress and uncertainty. This multi-indicator approach is powerful when used together, helping traders interpret market behavior effectively. Additional confirmation comes from related instruments like the yen and dollar index, providing broader market context. Overall, this method supports confident and informed intraday trading decisions.

53:54

Trading psychology and education program overview

53:54

The speaker discusses the importance of trading psychology and emphasizes that successful trading depends on understanding oneself, including strengths and weaknesses. They stress that there is no single correct way to trade, and traders should find an approach that suits their individual style and comfort level. Adaptability is encouraged, with examples such as choosing different chart types like candlesticks or bars based on personal preference.

55:21

The forex education program is introduced as a comprehensive course that now includes funding options, allowing traders to start with small accounts and progress to managing larger sums with the program’s capital. This risk-free evaluation process is designed to help traders prove consistency and develop skills to handle increasing account sizes within conservative risk management rules. The program attracts both forex and stock traders due to its broad applicability.

56:49

The speaker explains upcoming updates to trading indicators across multiple platforms such as MT4/5, NinjaTrader, TradingView, and TradeStation, which will be available before Christmas. Existing customers will receive new indicators free of charge. Additionally, new indicators are being developed, including a significant one currently in the pipeline.

57:47

Anna’s trading books have gained international recognition, having been published in Vietnam, China, Japan, and Taiwan. The team expresses interest in finding a European publisher to expand availability. The speaker thanks attendees for participating in the sessions and extends holiday wishes, encouraging traders to enjoy the remainder of the trading year.

58:53

Details about upcoming new series, including those specific to TradeStation, are shared, with notifications sent automatically to registered users. The team plans a short break of three to four weeks, but assures continued support via email contacts. The session closes with thanks and well wishes for the New Year.

By Anna Coulling – creator of volume price analysis