Yesterday was the start of another trading week, which not so long ago would have simply prompted a quick look at the economic calendar to check on any important item of fundamental news up ahead, but instead, now the first question most of us ask is what is Donald likely to be tweeting about today? Having blindsided everyone on North Korea, and regardless of whether the proposed meeting between him and Kim actually takes place, it was yet another example of the extent to which our trading and investing landscape has changed since his election in 2016.
Indeed, at present, trying to forecast or anticipate market sentiment and mood is akin to flying and suddenly being struck by clear air turbulence, which is a phenomenon both pilots and passengers dread, not least because although they know it can and does occur, there are no early warning signs and it usually happens when least expected.
Moreover, in our world Donald’s tweets have added a further layer of uncertainty which is then accompanied by volatility, and as I have said in the past, volatility can be your greatest friend or your greatest enemy as many traders and investors recently discovered when a number of highly leveraged inverse volatility ETFs imploded.
A side effect of this current environment is that trading can be so much more tiring and feel very much like a battlefield, where periods of inactivity and quiet are suddenly brought to a halt by the next barrage, which in our case is usually unleashed by Donald Trump!
However, as volume traders we do have an immense advantage, because it is at times such as these when the power of volume price analysis is truly revealed, and whilst price action together with our technical armory can provide some insights, it is only when volume is applied to the charts that the truth behind the price action becomes crystal clear.
This is seen most graphically when equity markets plunge, as we have seen in recent weeks, only for them to recover relatively quickly thereafter. What has been abundantly clear is the extent to which the market makers have been hugely active during this period, buying in volume in preparation for the recovery and rally higher.
The same approach is true of many blue chip stocks where the accumulation phase was self evident, before reinstatement of the longer term bullish trend. And for those stocks in a sustained bullish trend, recent volatility has merely been a significant correction and pause point in the longer term trend higher. But for those stocks with a bearish sentiment, this correction has simply reinforced the trend lower.
Moving forward, whilst yesterday has been relatively muted in the forex world, the NQ continues its relentless rise higher and has moved into new high ground, trading at the time of writing at 7155.25, with the phases of market maker buying clearly self evident on the daily chart.