After the extreme volatility of the last couple of weeks, traders and investors are left wondering where US indices are heading next, and for a possible answer to that particular question, we can turn to the daily chart for the YM E-mini and the futures contract for the Dow Jones where we do now have some meaningful price action.
However, the place to start, and what immediately catches the eye, is the volume, or rather the lack of volume which has accompanied much of the turmoil of the last few weeks.
If we start with the candle of Jan. 24, which by any standards, was an extreme day, and yet look at the associated volume, yes, it's high, but extreme? No.
The following day was a lesser repeat but once again on such a dramatic day, one would expect to see more. And so this through line or theme continues as we look at the candles of the last two days. Yes, the price action is rising strongly perhaps, but the volume is falling in tandem, so all in all, not a strong outlook.
Moreover, with the volume point of control at 35,600 and denoted with the yellow dashed line now directly ahead, at the very least we can expect to see a pause at this point along with congestion to develop at this level, as the index continues to struggle its way back from the price waterfall of January.
Overall, the current price action has the look and feel of a short-term rally and not a full-on recovery.