Why the Nasdaq 100 moves in a different way to the Dow and S&P500….and more volume price analysis lessons

Why the Nasdaq 100 moves in a different way to the Dow and S&P500

This is the second part of the US day trading session and first, Anna explains why the three ‘sister’ US indices move in different directions on a daily basis. Then David moves to oil and gold along with the US indices which are in consolidation ahead of the FOMC release due later and one which is likely to set the tone ahead of the Presidential election later in the year.

00:10

YM moves opposite to ES due to index composition

00:10

The speaker explains why the YM index is moving in the opposite direction compared to the ES and NQ indices. The YM does not heavily feature tech companies, unlike the ES and NQ, which are strongly influenced by a few major tech stocks such as Alphabet (Google) and Facebook. This concentration of tech stocks is driving the ES and NQ indices higher, while the YM, composed of a broader range of companies, is behaving differently.

01:27

YM focuses on value stocks vs tech-heavy NQ

01:27

The speaker discusses the difference between value stocks and more modern tech stocks, noting that value stocks tend to be older, more traditional companies and are considered less exciting compared to tech stocks, which are more volatile and popular. A recent example is the replacement of Exxon in the Dow Jones Industrial Average with Salesforce, reflecting a shift from traditional to tech companies in the index. The speaker also mentions that some stocks like Apple appear in multiple indexes with varying weightings.

02:36

The speaker explains how stock indices are constructed in ways that can make them appear attractive to investors, sometimes not fully representing the actual economy. The removal of Exxon, a major petrochemical company, from the Dow and its replacement by Salesforce, a cloud-based tech company, illustrates this rotation in the market. The discussion touches on the political and strategic aspects behind index configurations.

03:42

The segment concludes with the speaker handing over to David, suggesting that the Dow Jones Industrial Average is currently stable around a volume point of control and is expected to oscillate unless significant market changes occur. The speaker also hopes the audience can see and hear the upcoming presentation.

04:17

Indices trading around volume point of control

04:17

The speaker discusses moving the chat box aside and then focuses on trading indices, specifically the YM, ES, and NQ. They highlight that the market is currently hovering around the volume point of control with significant volatility but limited directional movement. Trading in such conditions is possible but requires moving down to very fast time frames, such as 15 seconds, to capture opportunities. This approach is not suitable for everyone, and patience is advised until after news releases, when clearer trends and volatility emerge.

05:19

Further explanation is given on trading during news events, emphasizing the need for fast time frame trading in volatile, congested markets. The speaker notes that if fast trading is not preferred, it’s best to wait for news to pass, observe volume and trend development, and then enter trades 15-20 minutes later. The market is expected to remain in this congested state for several hours. The speaker also points out recent divergence among the three indices, with the NQ moving higher, the ES somewhat following, and the YM sometimes moving down, which is unusual.

06:19

The discussion shifts to multiple time frame analysis of the YM index across very short intervals ranging from 15 seconds up to 15 minutes. Each time frame shows trading centered around the volume point of control, indicating market congestion and lack of clear direction. While the market remains tradable on fast time frames, it requires quick reactions. The speaker reassures that the same trading principles apply regardless of time frame, including using volume, support and resistance, and other indicators.

07:23

The speaker elaborates that all indicators, such as volume point of control, accumulation/distribution, support, resistance, and volatility indicators, function similarly even on sub-one-minute time frames. Trading at these speeds demands sharp focus but follows the same fundamental rules. Currently, there is little activity in longer time frames, reinforcing that trading fast is the primary option during this period of congestion.

07:54

Volatility triggers and snap moves explained

07:54

The discussion begins with an analysis of oil price movements, highlighting a significant snap move higher accompanied by strong volume and volatility triggers. This volatility indicates rapid price changes compressed into a short time frame, which often sparks trader interest due to the fear of missing out. The volatility is described as a compression of price and time, causing fast market moves that attract trader participation, typically followed by either congestion or reversal.

10:08

The speaker explains how snap moves in the market trigger emotional responses, compelling traders to jump in due to boredom or the desire to make quick profits. These moves often lead to congestion or reversals, making it crucial to take profits quickly if a trade goes positive. Market makers and big operators exploit these emotional triggers, understanding the pain of losing in these volatile moves and using it to their advantage.

11:30

The volatility pattern is observed across different markets and timeframes, including forex and cash markets during major openings. The example of a sharp move lower followed by a congestion phase is discussed, with expectations for a rally targeting the volume point of control, where heavy volume typically causes further congestion. Oil has been consolidating around $42-$42.50 per barrel, with additional volatility triggers indicating potential reversals and support levels.

12:57

Further analysis of oil shows a snap move with a reversal supported by significant volume, indicating strong buying pressure at support levels. The market transitions from bearish to bullish, with the indicator designed to help traders stay in the move to maximize potential gains. However, a falling volume during price declines suggests limited downside momentum, implying the market is unlikely to move far down without effort.

13:52

The focus shifts to other indices and the VIX, highlighting sideways trading and congestion with little directional movement. The VIX shows a snap move followed by a period of limited progress, reflecting uncertainty and lack of clear direction in the market. This suggests that the indices are in a wait-and-see phase, with no strong trends currently emerging.

15:02

Gold and VIX volume price analysis anomalies

15:02

The speaker analyzes gold price action with volume price analysis, focusing on anomalies in volume relative to candle spreads. They highlight a three-candle move where volume behavior indicates market weakness despite attempts to rally. The increased volume without price advancement signals heavy selling pressure and suggests that market makers are suppressing the price, showing effort without the expected result.

16:42

The discussion continues on volume price anomalies, emphasizing the importance of comparing volume within the same session for accurate analysis. A two-bar reversal pattern emerges, with a bearish engulfing candle indicating a potential downside move. The speaker explains how this pattern appears on different chart timeframes and signals a market roll over after initial resistance.

17:37

The market shows signs of buying interest with rising volume, though price has not fallen as much as expected, creating an inverse anomaly. This buying volume supports a developing rally with rising price and volume, but the overall sentiment remains bearish, so a trend change has not yet occurred. The speaker transitions to analyzing the same market on a one-minute chart for a different perspective.

18:35

On the one-minute chart, similar volume price dynamics are observed, including a volatility trigger with high volume causing price spikes and squeezes into congestion areas. The speaker explains that volume price signals rarely produce immediate market reactions; instead, signals, congestion, and further confirmations typically precede a market roll. Patience is necessary before acting on strong volume price signals.

19:40

The conversation shifts to trading styles, highlighting that Tony Wilson focuses on day trading US market indices and stocks, while Anna often trades forex before moving to indices and commodities. The speaker addresses a question about identifying stock accumulation phases, noting observations of stocks trending strongly, consolidating, and making new highs across multiple timeframes.

20:14

Accumulation and distribution across time frames

20:14

The concept of accumulation and distribution applies across all time frames, from one minute to one month charts. While monthly charts show prolonged phases lasting months or years, intraday charts can show complete cycles within minutes or hours. The principle remains consistent: distribution indicates selling and market weakness, while accumulation signals buying strength. This cyclical behavior, involving heavy selling and buying phases with associated volume patterns, is observed in both stock and forex markets.

21:48

Accumulation and distribution phases vary in duration depending on the time frame, with daily charts showing weeks or months-long trends. Stocks often fall through phases of selling, followed by congestion and accumulation periods where selling diminishes and buying increases. Tests of supply occur to confirm if selling pressure has been absorbed before prices rise again. This cyclical trend of accumulation to distribution and back is a fundamental market behavior.

22:53

The time and sales window provides insight into order sizes passing through the market, filtering out small noise trades to focus on large blocks of 20, 30, or more contracts. Identifying these large orders is key, as they often signal significant market activity and can trigger important price movements.

23:20

Time and sales data reveals market strength

23:20

The market’s reaction to large block trades on the time and sales data reveals the strength or weakness of the market. The speaker highlights a 27-block trade and looks for even larger blocks to understand market direction. Observing the three-minute chart, buying activity is detected with candle wicks mostly at the bottom, indicating attempts to rally despite some selling pressure.

24:19

The market shows an uptrend with buying support each time prices dip, though the strength of the rally is moderate. On the one-minute chart, heavy volume is observed near the volume point of control, signaling a key support and resistance area. The accumulation distribution indicator confirms that volume has shifted, leading to expected congestion as the market battles through these levels.

25:14

Market movement is likely to be slow and congested due to significant volume at key resistance levels. A short volatility trigger on the 15-second chart suggests some congestion but a tentative push higher. The volume point of control on one-minute and five-minute charts shows strong resistance with numerous tests confirming this as a difficult level to break through.

26:07

Price-based resistance levels are very strong, with multiple tests and heavy volume making it challenging for the market to move higher. Several layers of resistance exist, requiring substantial volume to break through. Given this, entering trades at this point is not advisable. The speaker emphasizes analyzing multiple time frames for a comprehensive view and notes that futures indices are trading in a tight range with little movement, highlighting the need for patience.

27:04

Trading strategies: patience and market selection

27:04

The speaker advises traders who are uncomfortable with fast time frame trading to wait until major news releases have passed before entering the market. They emphasize the importance of being patient during slow or tough trading days, especially if one specializes in trading a limited set of markets like indices. The speaker highlights that many traders prefer focusing on specific instruments, which is fine, but it requires accepting that some days may lack sufficient price action.

28:26

Information is provided about where to find various trading indicators on platforms like QuantumTrading.com, MT45, Ninja Trader, and TradingView. The speaker mentions the upcoming integration and launch of TradeStation Global, which will connect with Interactive Brokers accounts and offer extensive market coverage. They also discuss TradeStation’s advanced scanning tools and the ongoing work to prepare support materials for its release.

29:21

The speaker explains plans to expand indicator availability on TradingView using Pine Script, which now supports the needed drawing functionality. Customers who purchase the full TradingView package at the current price will receive these indicators as a free upgrade. This package is positioned as a cost-effective alternative compared to MT45, and the speaker encourages investment now before prices rise.

30:19

Details are shared about the comprehensive Forex education program offered through QuantumTradingEducation.com. This program includes over 200 hours of video covering trading psychology, fundamental and technical analysis, and trading mechanics. Additional resources include PDF downloads and the VPA Traders forum hosted by the speaker and Anna. All related books are available on Amazon in both Kindle and paperback formats.

30:50

The speaker thanks the audience for attending and announces the return to a regular Tuesday webinar schedule, running through to Christmas. Notifications will be sent for these sessions, which occur in the UK morning and afternoon. They acknowledge a recent temporary schedule change due to personal reasons and invite questions via email.

31:20

Closing remarks encourage viewers to enjoy the remainder of the trading session, noting that activity may be subdued until after the upcoming FOMC announcement. The speaker wishes everyone a good trading week, reminds them to stay safe, and looks forward to seeing them again soon.

By Anna Coulling – creator of volume price analysis