36. Market analysis
Weekly Market Analysis Overview
Economic Calendar Insights
- The analysis begins with a review of the economic calendar, crucial for understanding market conditions before the weekly cycle starts.
- There are no high-impact news events on Monday; however, this does not imply that trading should be avoided. Price action can still occur without significant news.
- Sequential SMT (Smart Money Technique) and shifts in market structure can happen even when there is no impactful news, affecting price movements.
Importance of CPI Week
- Wednesday features important CPI data at 8:30 a.m., which typically brings volatility to the market during the second week of each month.
- If sequential SMT is established prior to CPI release, it may lead to price movement in line with existing order flow.
- FOMC meeting minutes released at 2 p.m. could also influence volatility if sequential SMT occurs beforehand.
Volatility Patterns and Trading Strategies
- Thursday presents multiple volatility points throughout the day, impacting various markets including bonds and Forex.
- Traders should focus their attention on Wednesday and Thursday for potential high points in weekly trading due to expected volatility.
- The one-hour time frame is recommended for intraday traders; lower time frames like 15 minutes can be used for better entry points.
Key News Events Impacting Trading
- Friday includes GBP news at 2 a.m. and USD news at 10 a.m., following Monday's price action which establishes the true week open.
Interest Rate Markets Analysis
- The interest rate market comprises futures such as 10-year and 5-year treasury notes; current trends suggest potential downward movement before an upward rebound.
- Observing sequential SMT across these assets may indicate future price gravitation towards higher levels due to low resistance liquidity runs.
Currency Pair Dynamics
- Recent price actions show anticipated movements in currency pairs like EUR/USD and GBP/USD after weeks of monitoring specific patterns.
Market Analysis and Sequential SMT
Understanding Market Dynamics
- The discussion begins with an analysis of market lows, indicating that the current candle closes slightly below a previous low, suggesting potential sequential Smart Money Technique (SMT) patterns.
- Emphasizes the importance of higher time frame cycles for new traders, recommending they observe these cycles closely to understand market movements better.
- Highlights the need for displacement in price action before making any trading decisions, stressing that sequential SMT must be established first.
Liquidity and Price Action
- Discusses the possibility of breaching either high or low wicks to establish market bias, noting that sequential SMT indicates a gravitation towards higher prices after bullish signals.
- If bearish sequences are observed, it could indicate a weaker dollar against stronger Euro and Pound currencies; however, confirmation through SMT is essential.
Analyzing Futures Markets
- Transitioning to futures markets analysis, particularly E-mini S&P Futures and NQ 100 Futures. Observations on daily time frames reveal tight consolidations among assets within a triad.
- Identifies equal highs without significant closes above them as signs of range-bound behavior in price action. This suggests potential bearish movement for the dollar during the week ahead.
Confirming Market Movements
- Establishes that breaking above certain highs while maintaining lower time frame sequential SMT can confirm returns to previous ranges.
- Stresses that understanding price action is crucial; random movements should not dictate trading strategies without proper confirmations from sequential SMT.
Consolidation Patterns and Future Predictions
- Notes how consolidation patterns across different assets can signal upcoming large-range movements. If one asset consolidates while others do not, it may indicate significant shifts in price dynamics.
- Reiterates the necessity of comparing three assets within a triad to identify which one might lead or tip its hand regarding future movements.
Key Takeaways on Trading Strategy
- Advocates for studying market behaviors rather than relying solely on visual aids like lines drawn on charts; understanding context is vital for effective trading strategies.
Understanding Liquidity and Market Structure
Conceptual Framework of Market Analysis
- Emphasizes the importance of a rule-based conceptual method in market analysis, focusing on symmetrical and unsymmetrical highs and lows.
- Identifies liquidity pools based on price movements, highlighting that unsymmetrical lows indicate areas with significant liquidity.
Analyzing Price Action
- Discusses the significance of price breaches among different indices (ES, NASDAQ, Dow), indicating where liquidity exists above or below certain highs.
- Stresses the necessity for a 4-hour closure to analyze monthly cycles effectively rather than relying on shorter time frames.
Importance of Closures Over Wicks
- Clarifies that wicks alone do not signify market direction; closures are crucial for understanding true price action.
- Highlights sequential SMT (Smart Money Technique) as an indicator for potential entries but warns against misinterpreting bullish signals from mere wicks.
Market Structure Shifts
- Explains how predetermined shifts in market structure can signal bearish trends when prices fail to break above previous highs.
- Notes the need to focus on closures during lower time frame analyses to avoid distractions from misleading high points.
Sequential SMT and Price Movement Confirmation
- Reiterates the importance of observing closures during trading sessions, particularly in New York sessions, to confirm market moves.
- Warns against relying solely on wicks; emphasizes that bodies provide more reliable information about price action.
Recognizing Liquidity Areas
- Points out instances where there is no close below certain levels despite wicks indicating otherwise, suggesting these areas represent liquidity.
- Critiques common misconceptions regarding sequential SMT without proper closure confirmation; stresses that bodies reveal true market intentions.
Final Thoughts on Market Dynamics
- Concludes that smart money reversals occur after two sequential SMT confirmations regardless of initial interpretations.
Understanding Market Dynamics and Price Action
The Role of Indices in Price Action
- The speaker discusses how the pound and Dow can behave unexpectedly within index futures, highlighting that explosive price action often occurs when three indices align.
- When only two indices show alignment, it indicates lower probability trades with less volatility, but they can still be utilized for trading decisions.
Sequential SMT and Its Importance
- The concept of sequential SMT (Smart Money Technique) is introduced; it becomes significant when one asset class closes below its previous lows while others do not.
- A specific example illustrates how price action can indicate potential upward movement despite mixed signals from correlated assets.
Identifying Weekly Highs and Lows
- The discussion emphasizes the importance of recognizing weekly highs and lows across different asset classes, noting that these do not typically occur on the same day.
- Key days for identifying these levels are highlighted as being between Monday-Tuesday, Tuesday-Wednesday, Wednesday-Thursday, or Thursday-Friday.
Liquidity and Market Influence
- The speaker notes that obvious liquidity influences price movements significantly; this liquidity may manifest differently across various indices.
- Specific highs in the S&P 500 and Dow are identified as critical points to monitor for potential market moves.
Conclusion and Recommendations