This was on the radar and something I forecast last week!

This was on the radar and something I forecast last week!

The sharp falls yesterday for US equity markets was something I highlighted last week in my market analysis and signalled in several ways, from the VIX, to volume price analysis, and just as important in the forex world. The clues were all there if you knew where to look!

00:00

Introduction and trading disclaimer

00:00

The recording begins with a reminder about the risks involved in trading and investing. The speaker emphasizes the importance of only using money one can afford to lose. They also mention the significant market activity observed that day, noting a major sell-off with the Dow experiencing a notable decline.

00:33

Market sell-off and Dow drop

00:33

The speaker discusses market activity, noting that the figure has reached 1,300, which is remarkable but not entirely surprising for regular followers. They reference a post from June 3rd highlighting unusual market behavior, particularly from a volume price analysis (VPA) perspective.

01:09

VPA and market correction signals

01:09

This segment discusses examining whether a market correction was predictable based on various indicators. The speaker considers if the correction was foreseen through technical analysis, focusing on the VPA (Volume Price Analysis) perspective, movements in the VIX (volatility index), and trends in the forex market, particularly involving yen currency pairs. The content relates to teachings provided in their Forex sessions.

01:47

Intermarket and forex- yen analysis

01:47

This segment introduces the concept of intermarket relationships and cross-market analysis, explaining their importance for anticipating market movements. It highlights how traders in one market, such as forex trading a yen pair, should observe related markets like equities. The yen is described as a currency sensitive to risk sentiment, making it crucial to monitor indices and stocks when trading related instruments.

02:25

Yen currency and equities correlation

02:25

The speaker explains how to analyze the forest market by observing currency flows, specifically focusing on the yen. If the yen is being heavily sold, equities are expected to rise; conversely, if the yen is being bought, equities tend to fall. They mention having specialist indicators that simplify this analysis, eliminating the need to examine numerous charts, referred to as their currency strength tools.

03:00

Currency strength indicator overview

03:00

The speaker explains an indicator that breaks down the forex market into individual currencies, focusing on the Japanese yen represented by a magenta line. On the hourly chart, the yen is currently being strongly bought, whereas the daily chart shows it has been selling off significantly. This trend aligns with the broader market movements, particularly the strong rally in indices like the Nasdaq.

03:34

Nasdaq psychological level and pullback

03:34

The speaker discusses market psychology around critical levels, such as the 10,000 mark on an index. They explain that before a major correction, there can be bursts of euphoria as the market tries to surpass this psychological barrier. Once it reaches or just crosses this level, a sudden pullback or reversal often occurs due to various underlying reasons. The explanation includes the perspective of an investor who has already bought in, highlighting the emotional and psychological factors influencing market behavior.

04:05

Investor psychology and selling behavior

04:05

The speaker discusses market behavior around the last market top before the significant pandemic-induced sell-off. They describe how some investors who held onto their positions during the downturn found themselves nearly back to their entry point and might consider selling to lock in profits. Others who timed their buy-in during the buying climax after the fall may also decide to take profits. The segment highlights the psychological factors influencing these decisions and hints at an upcoming discussion about the yen, referencing a related blog post.

05:06

Market disconnect and yen pairs anomaly

05:06

The speaker discusses a market disconnect observed since June 3rd, highlighting an unusual situation at 8 PM UK time. Despite significant positive updates earlier in the day, certain indices and pairs like Devon walnut did not respond as expected, raising concerns about market sentiment and signaling potential issues.

05:37

Volume price analysis (VPA) benefits

05:37

The speaker expresses enthusiasm for the VPA (Volume Price Analysis) methodology, praising its effectiveness when applied to actual charts. They acknowledge the positive feedback from numerous traders and investors who use this approach, highlighting the impact and value it has brought to their students and VPS scholars.

06:13

Weekly chart volume anomalies explained

06:13

The speaker explains how volume analysis enhances trading and investing methodologies by providing clearer insights. Using the weekly chart of the YM as an example, they note three consecutive rising candles but highlight an anomaly in the volume: despite the increasing price candles, the volume remains identical or inconsistent with typical patterns. This contradicts Wyckoff’s law of effort and result, suggesting that the trend may not sustain.

07:17

The speaker continues by discussing potential pullbacks after the observed anomaly, noting that the price has pulled back to the volume point of control (VPOC). They then introduce the VIX for further analysis and hand over to David, who will provide more detail on the VIX, as the speaker currently does not have it displayed.

07:49

Fed actions and market correction reasons

07:49

The segment discusses recent market charts, focusing on the relationship between the yin and the VIX, indicating that a significant event is likely imminent. It explains that the Federal Reserve has committed to quantitative easing (QE), essentially printing money indefinitely to support the economy and prevent a depression, which has influenced market expectations.

08:28

Pandemic wave and market violence impact

08:28

The speaker discusses a major market correction attributed to concerns over a second pandemic wave and ongoing violence in various cities. This correction was anticipated by those who followed certain indicators, such as VIX charts. The discussion also hints at analyzing live price action for further insights.

09:04

CAD/JPY and oil price relationship

09:04

The speaker discusses the significant downward movement in the Canadian dollar (CAD) since the US market opened, highlighting its strong correlation with the oil market. Oil prices have dropped sharply, approximately eight percent, causing a notable impact on the CAD due to Canada’s status as a major oil producer. The segment sets up further analysis to be passed to David, who will examine the larger chart context.

By Anna Coulling – creator of volume price analysis