70. Market overview 11/7/2024

Market Insights and CPI Analysis

Overview of CPI Impact on Market Volatility

• The speaker introduces the topic, noting that not everyone had a good week in the market due to the upcoming Consumer Price Index (CPI) report.

• Emphasizes that CPI is scheduled for the second week of each month, which can indicate market volatility; these days are critical for measuring potential price movements.

Trading Strategies Around CPI

• Advises new traders to refrain from trading on the day before CPI announcements, as it often leads to unpredictable price action.

• Anticipates increased volatility on the day of CPI release compared to earlier in the week, particularly if it falls on a Thursday.

Preparing for High Impact News Events

• Suggests using this time to review past successful trades and backtesting data instead of live trading, especially before significant news events.

• Notes that Fridays typically see a return to weekly ranges after high-impact news events, making them easier trading days.

Focus on Currency Pairs: GBP and EUR

• Highlights ongoing analysis of the Great British Pound (GBP), indicating confidence in reaching previous highs despite current shortfalls.

• Discusses price stabilization and consolidation patterns necessary for predicting future movements in currency pairs like GBP and Euro.

Understanding Market Manipulation Signals

• Explains how tight price ranges can indicate manipulation within markets; emphasizes observing liquidity above key highs as potential targets.

Market Analysis and Trading Strategies

Current Market Conditions

• The liquidity has not yet been taken, indicating that the market is currently at a high point rather than a low. A correlation is likely forming.

• For confirmation of this correlation, price must trade above a specific high; however, it’s essential to wait for lower time frame confirmations before making trading decisions.

Correlation Cycles

• Discussion on monthly and weekly cycles: a two-stage correlation can lead to more significant market movements if it skips cycles.

• Observations on the US Dollar Index show choppy price action, suggesting difficulty in reading market trends despite some predictability.

Trading Strategy Insights

• The speaker prefers straightforward chart analysis over complex strategies but acknowledges the need for deeper concepts in current conditions.

• Emphasizes the importance of quick decision-making when analyzing charts; ideally wanting to understand price movements within 30 seconds to a minute.

Price Movement Expectations

• Expansion in price movement is expected based on previous correlations between monthly and weekly cycles.

• Cautions against holding positions too long during volatile market conditions; advises taking profits instead of waiting for unrealistic targets.

Understanding Manipulation and Signals

• Highlights that manipulation often occurs with current correlations; traders should be aware of false signals from sudden price spikes.

• Differentiates between genuine upward movements versus manipulative actions by explaining how certain patterns indicate continuation or reversal.

Dow Jones Index Considerations

• Advises caution regarding the Dow Jones Index as it may provide misleading signals when out of sync with NASDAQ and S&P 500.

• Discusses how trading strategies can fail if relying solely on one index without considering broader market dynamics.

Forex Market Dynamics

• Notes that similar issues arise in Forex markets where certain currencies may give false signals during range-bound conditions.

Understanding Market Signals and Price Synchronization

Identifying Out-of-Sync Assets

• The Euro can provide misleading signals when its price is not aligned with other assets in the market triad.

• An example of synchronization is given: if the NASDAQ mirrors the Dow while the Dow follows the S&P 500, it indicates a cohesive market movement.

Key Levels and Predictions

• Previous live streams highlighted specific levels expected for the Great British Pound (GBP), emphasizing a focus on high-probability trading ideas.

• The importance of using daily or four-hour time frames is stressed, as they offer significant expansion opportunities for lower time frame cycles.

Importance of Candle Patterns

• A critical low was identified that deviated from expected programming due to insufficient detail provided to an indicator creator.

• The opening candle of Sunday marks a pivotal point, representing both the week's opening price and the first quarter's low.

Fair Value Gaps and Market Reactions

• A higher time frame fair value gap below this critical low suggests potential market reactions; previous charts support this observation.

• Sequential Smart Money Techniques (SMT) were noted, indicating that while prices may vary across currencies, key levels remain influential.

Precision Swing Points and Correlations

• Recognition of precision swing points following established SMT patterns helps determine when to take market movements seriously.

• A precision swing point was identified below the true weekly open price, suggesting potential future movements based on this correlation.

Daily Fair Value Gaps and Market Dynamics

• The relationship between daily fair value gaps and recent price actions highlights how these gaps influence trading decisions.

• Observations about new week openings indicate that gaps formed at these times can significantly affect subsequent price behavior.

Understanding Fair Value Gaps

The Concept of Fair Value Gaps

• The fair value gap (IVG) is likely to hold due to the absence of a corresponding gap nearby, indicating a strong correlation.

• A precision swing point indicates potential reversals; when price trades into a fair value gap, it typically does not fill the next gap immediately.

Price Action and True Opens

• When trading into a fair value gap, the true opening price acts as either support in bullish conditions or resistance in bearish conditions.

• The formation of gaps is influenced by balanced price ranges and true opens, which prevent overlapping with previous wicks.

Market Behavior and Expectations

• Once a gap is filled, it’s generally expected that subsequent gaps will remain unfilled initially; this reflects common market behavior.

• Observing price action over time can provide insights; it's important to take notes on market movements for better understanding.

Conclusion and Recommendations