50. Market analysis and lecture 14/5/2024

Market Analysis and Trading Insights

Overview of the Week Ahead

• The speaker expresses hope that everyone had a good weekend and mentions some may have had successful trading days.

• No high-impact news events are scheduled for Monday; if none arise, the live stream will occur on Monday afternoon. If there is news, it will be held on Sunday.

Market Conditions and Trading Strategy

• There was a correlation between last Friday's market performance and today's, particularly in the S&P 500, NASDAQ, and Dow Jones indices.

• High-impact news events are expected tomorrow at 8:30 AM and 10:00 AM; Wednesday is anticipated to be more favorable for trading due to CPI data release.

Volatility Expectations

• The speaker emphasizes that while many avoid trading before CPI announcements, setups can still be taken with caution.

• After CPI releases, markets typically trend in one direction for several days due to sentiment shifts.

Monitoring Market Movements

• The analysis will focus on monitoring market behavior before and after CPI announcements; a detailed examination is planned for Wednesday's live stream.

• The speaker plans to analyze index futures closely this week, highlighting previous accurate predictions made during past streams.

Gaps and Liquidity Analysis

• Discussion about price expectations based on previous market movements; an upward trend was anticipated without falling back into fair value gaps.

• An explanation of how gaps formed below certain highs indicates potential future price movements; these gaps are critical in understanding market dynamics.

Correlation Observations

• The presence of multiple gaps suggests an imbalance in liquidity which could lead to significant market shifts.

Understanding Market Gaps and Price Movements

Analyzing Price Expectations

• The speaker discusses the reasons behind not expecting price movements within a specific gap, emphasizing that prices closed above previous highs in the NASDAQ index.

• A particular candle closure is identified as instigating a fair value gap, indicating market inefficiencies despite prior candles closing below certain levels.

• The discussion includes how gaps can be anticipated based on candle closures, even if they have not yet formed.

Price Trends and Liquidity Pools

• The expectation of higher prices is reiterated, with an emphasis on the Dow's influence on overall market trends.

• The speaker clarifies that there was no anticipation of price pullbacks; instead, a consistent upward trend was expected due to liquidity pools being targeted.

• A brief pullback in price is analyzed; it is deemed non-bearish as there were no significant correlations affecting this movement.

Timeframe Analysis and Market Correlation

• Transitioning to a one-hour timeframe reveals repeated higher lows, suggesting bullish momentum despite potential confusion regarding market corrections.

• Intermarket relationships are introduced as critical for understanding price movements; these insights were shared during a live stream for real-time accuracy.

Trading Insights and Weekly Cycles

• The speaker reflects on their confidence during trading sessions, particularly when anticipating higher prices without fear of failure or criticism.

• A notable point gain (56 points) from trades is highlighted as significant for traders operating with single contracts.

Importance of Timing in Trading Strategies

• Thursday is emphasized as an optimal trading day due to its unique model compared to other days of the week.

Market Analysis and Correlations

Understanding Market Closures

• The importance of market closures is emphasized, indicating that the lowest close from previous days is crucial for analysis.

• A correlation exists when the current close remains lower than a previous day's close, suggesting potential market movements.

Price Trends and Expectations

• Thursday's price action failed to break below Wednesday's low, indicating a possible reversal or support level.

• Observations show that prices trending lower should lead to expectations of higher prices as the market searches for support.

Analyzing S&P 500 Movements

• The S&P 500's position above Wednesday’s low suggests an anticipation of higher prices despite lower trends earlier in the day.

• A significant market structure shift occurs once the price surpasses a swing high after a downward trend.

Cracking Correlation Insights

Comparative Analysis of Markets

• The discussion contrasts Wednesday and Thursday highs, focusing on how different markets interact with each other.

• Notable correlations are drawn between currency pairs (e.g., Euro and Great British Pound) and index futures like the S&P 500.

Importance of Direct Correlations

• The speaker reflects on their analytical process while monitoring multiple charts simultaneously to identify key patterns.

• A direct cracking correlation is highlighted where specific movements in currencies can signal broader market shifts.

Market Dynamics and Predictions

Synchronization Among Assets

• When major currencies move in sync with indices like the S&P 500, it indicates underlying market dynamics at play.

• The concept of "stop hunts" is introduced, suggesting that certain price actions may be designed to trigger stops before reversing direction.

Key Takeaways on Asset Behavior

Understanding Price Movements and Correlations in Forex

Analyzing Price Ranges

• Discussion on price movements falling below the 50% range, indicating potential market shifts.

• Emphasis on price failing to close below the 50% range, suggesting a correlation that may indicate future trends.

Correlation Between Currency Pairs

• Observations of the Euro closing below a low while the Dollar closes above a high, highlighting intermarket correlations.

• Importance of comparing multiple assets within the FX Triad (Euro, Pound, Dollar) to identify market patterns and correlations.

Market Behavior Patterns

• Explanation of how index futures (S&P 500, NASDAQ, Dow Jones) should mirror each other with opposite correlations during market movements.

• Noting that significant market behaviors often occur on Thursdays but can happen at other times as well.

The Role of Timing in Trading Strategies

• Description of how slow price action can lead to explosive moves when certain conditions are met.

• Introduction to direct intermarket sequential SMT (Smart Money Techniques), emphasizing failure swings across different assets.

Weekly Cycle and Precision Swing Points

• Discussion about the "Monday model" and its significance in trading strategies; noting its reliability despite occasional failures.

• Insights into how traders could potentially focus solely on Mondays for trading opportunities based on historical patterns.

Cracking Correlations and Entry Points

• Analysis of price movements from Friday to Monday and their impact on market direction; identifying key swing points.

• Highlighting the importance of using one-hour time frames for precision swing points in conjunction with weekly cycles.

Understanding Precision Swing Points

• Guidance on finding entry points using shorter time frames (5-minute or 15-minute charts), especially around precision swing points.

• Stressing that understanding sequences related to precision swing points is crucial for effective trading strategies.

Understanding Market Dynamics and Liquidity Gaps

The Importance of Historical Context

• Discussion on the lack of awareness regarding historical market movements, emphasizing that many traders overlook significant past events that could inform current strategies.

• Mention of future expectations for market behavior, indicating a collective effort to eliminate misinformation and improve trading practices.

Monthly Market Open Insights

• Explanation of the significance of the first week of each month in relation to market openings, suggesting that this period is crucial for understanding price movements.

• Introduction to the concept of "true open" at the beginning of each quarter, highlighting its importance in trading strategies.

Precision Swing Points and Fractals

• Overview of precision swing points as critical indicators within various time frames, stressing their fractal nature and relevance across different scales.

• Emphasis on waiting for additional precision swing points to form before making trading decisions, reinforcing a methodical approach to analysis.

Analyzing Price Action and Liquidity

• Insight into how liquidity influences price reversals, with a focus on identifying areas where buy-side and sell-side liquidity converge.

• Discussion about monitoring major indices like S&P 500 and NASDAQ for predictive insights into market movements based on correlations with other indices.

Anticipating Market Movements Before Events

• Analysis of current market conditions indicating low probability price action; traders are advised to wait for clearer signals before acting.

• Preparation for upcoming economic events (e.g., CPI), encouraging traders to observe liquidity patterns during key sessions such as New York.

Evaluating Currency Pairs and News Impact

• Examination of liquidity levels in currency pairs like British Pound and US Dollar, noting significant highs and lows that may influence future price actions.

• Strategy recommendation: wait for high-impact news events that can trigger movement through existing liquidity pools.

Closing Thoughts on SMT Fills

Understanding Price Movements and Liquidity

Analyzing Price Gaps and Order Blocks

• The discussion begins with an analysis of price movements, particularly focusing on equal highs. It is noted that there was no gap left in the price action, which indicates a strong market behavior.

• A critical insight is shared regarding gaps not being filled before liquidity is sought in the opposite direction. This emphasizes the importance of understanding market dynamics and liquidity flows.

Trading Strategies and Risk Management

• The speaker mentions a session duration of 15 minutes, indicating a concise yet informative trading discussion. They plan to return for another session on Wednesday at 8:00 AM.

• Emphasis is placed on utilizing weekly cycles for identifying swing points effectively. Traders are encouraged to look for correlations between days of the week and hourly positions to enhance their strategies.