Where next for equities as risk on appetite continues?

Where next for equities as risk on appetite continues?

Always a worrying sign when the mainstream news advocates buying shares, and this is certainly the case with the Chinese Government urging people to buy with the Shanghai Composite continuing to drive higher along with the US markets.

00:00

Webinar introduction and technical issues

00:00

The speaker welcomes everyone to the morning webinar for the London session and thanks the attendees for their patience. They mention a technical issue with the headsets that was resolved by unplugging and replugging them, highlighting the common troubleshooting advice of turning devices off and on again.

00:33

Trading disclaimer and overview

00:33

The speaker begins by highlighting an important disclaimer about the risks involved in trading, emphasizing that one should never use money they cannot afford to lose. They acknowledge the presence of many newcomers and offer a brief overview of the session’s focus, which is analyzing forex market charts.

00:59

Volume price analysis and 3D market approach

00:59

The video explains oil price analysis using volume price analysis (VPA), which examines price action and volume to verify chart signals. The approach combines technical chart analysis, fundamental news, and related markets. The speaker emphasizes a three-dimensional method to understand the forex and other markets, helping chart readers become proficient in predicting price movements by integrating VPA with fundamental data and market interrelations.

02:14

Cross market analysis and forex market role

02:14

The speaker explains the concept of a 3D approach involving cross-market analysis. They emphasize the central role of the forex market in the financial world, describing it as the money market that quickly reflects market sentiment. The movement of currencies and currency pairs serves as an indicator of prevailing sentiment.

02:49

Specialist indicators for money flow

02:49

The speaker explains the development of a set of specialist indicators designed to identify market activity in real time across different time frames. These include the currency strength indicator, which tracks flows into individual currencies; the matrix, which identifies the most traded currency pairs and distinguishes the strongest and weakest currencies based on buying and selling activity; the array, which functions as a trend indicator highlighting the strongest trends among pairs; and the heat map, which displays multiple time frames for pairs with color-coded signals indicating strength, weakness, or potential reversals.

The emphasis is on monitoring these indicators at the live edge of the market for timely insights, and the speaker invites questions from users and students familiar with the tools.

04:24

Review of recent cash rate decision

04:24

The speaker invites viewers to ask questions in the chat and mentions having the NinjaTrader platform ready. They then review recent events, focusing on the cash rate decision and statement from the Reserve Bank of Australia (RBA), noting that interest rates remain unchanged across major economies and central banks. They highlight interest in the RBA’s commentary on the recent spike in coronavirus cases, particularly in Melbourne, and request any updated information from viewers in Australia.

05:32

Australia’s economy and virus impact

05:32

Australia has not experienced a recession for 30-40 years due to its robust economy supported by natural resources and strong trade ties with China. It weathered the 2007-2008 financial crisis well, but the recent virus outbreak has caused a significant economic downturn, likely leading to the first recession in decades.

For the first time, the central bank has joined other banks in quantitative easing (QE) through bond-buying to stimulate the economy. Despite this, the bank has kept policies mostly unchanged and is closely monitoring the situation, while market movements are currently driven by sentiment and developments in major indices like the Nasdaq, which recently reached an all-time high.

06:52

Market sentiment and equity performance

06:52

The video discusses a recent pullback in major US stock indices like the NASDAQ and S&P, noting their unusual synchronized movement. The NASDAQ has been performing strongly, alongside the Shanghai Composite, the Chinese stock market index, which has recently surged after a period of consolidation. The presenter highlights the importance of cross-market analysis involving equities and bonds to gauge market sentiment. It is suggested that Chinese authorities have been actively encouraging investment in the Shanghai Composite, contributing to its sharp rise, potentially positioning it as a competitor to the NASDAQ.

08:34

Shanghai Composite and political tensions

08:34

The speaker discusses a disconnect between the performance of companies and the overall market index, suggesting the market may be forming another bubble similar to the one in 2015 that led to a downturn. They highlight the influence of political factors, particularly tensions between China and the US, as well as other regional conflicts involving China, India, and Hong Kong. These geopolitical issues add complexity to the current market environment and trading strategies.

09:40

Focus on British Pound trading strategy

09:40

The speaker focuses on the British Pound as a key currency for trading, mentioning its relevance due to BRICS reemerging and personal preference. They highlight the importance of monitoring the range and volatility of currency pairs involving the British Pound, such as the Pound-Aussie (Pound-Ozzy). The narrowing range and reduced volatility in these pairs affect trading strategies, making it difficult to trade during periods of low volatility or congestion due to choppy price action.

11:27

Understanding price action and sea states

11:27

The speaker explains their approach to analyzing price action on charts, which they refer to as ‘sea states’—patterns of price movements that include uptrends, downtrends, and consolidations characterized by varying volatility or choppiness. They emphasize the importance of recognizing the current state of the chart not only on the timeframe of the trade but also on higher timeframes. Using the Pound-Ozzy currency pair as an example, the speaker discusses assessing average daily volatility, hourly volatility, and peak movement times of day to better understand and anticipate price behavior. They reference a tool from investing.com that helps track this data.

13:13

Pound pairs volatility analysis

13:13

The speaker analyzes recent price movements and volatility across various currency pairs involving the British pound. They note a decline in daily pip movement for the pound-Aussie (Pound Ozzy) while the pound-Canadian shows an increase in pip value, suggesting it may warrant closer attention. The pound-Swiss is relatively stable, and the pound-yen is volatile with choppy price action, typical for that pair. The Euro-pound pair is consistent but lacks significant volatility, which means limited momentum opportunities. The pound-New Zealand pair is experiencing a decline similar to the pound-Aussie, possibly linked to commodity currency trends. Overall, the discussion focuses on identifying pairs with meaningful, capture-worthy momentum rather than just choppy volatility.

15:11

Pound Aussie price moves and resistance

15:11

The speaker discusses observing a move just before the London market opens, specifically focusing on the pound versus the Australian dollar (pound Ozzy). The move has been choppy and confined within a narrow range, as seen on the daily chart, indicating that price action will not be smooth. They mention waiting for the move to stop at a key Camarilla level (R4) on the hourly chart, which aligns with a strong resistance zone around 79.75 to 79.80. The analysis incorporates price action, volume, support and resistance, and indicators to identify and confirm potential trading opportunities, acknowledging the complexity of considering all these factors alongside fundamental analysis.

17:03

Trading complexity and learning process

17:03

The speaker compares learning to trade with learning to fly an aircraft. Initially, both start with basic instruments and simple equipment, like a small propeller plane for pilots or fundamental market knowledge for traders. Over time, just as pilots advance to handling complex cockpits filled with numerous instruments, traders progressively incorporate more data and tools to improve their skills and decision-making.

18:19

Pound Aussie reversal and resistance levels

18:19

The speaker discusses the situation with the British pound, examining whether the current price action will result in a reversal. They highlight that the pound has reached significant levels of support and resistance, including price-based, volume-based, and hierarchical resistance, as defined by the Camarillo method. The focus is on determining if the movement will be a minor pullback or a full reversal.

By Anna Coulling – creator of volume price analysis