Volume signals the next move for the e-mini YM

December YM - Daily
December YM – Daily

Following my post of the 7th October when I made it clear that the e-mini indices and equity markets in general were in a fragile state, this week’s price action has more than validated this analysis, as the correction in the longer term bullish trend finally arrived.

The last two days have been dramatic to say the least, with equity markets plunging and then recovering on an intraday basis, as volatile price action engulfed the financial world, with the VIX spiking higher, and indices plunging lower. However, for volume traders, all is calm, and it is during periods such as this, that volume price analysis provides the complete picture of where the market is heading next, and on the daily chart for the e-mini YM, we have the clearest example yet that a bottom is being formed in the 15,750 area.

Wednesday’s price action was electrifying with the index tumbling over 550 points from the overnight session and into the physical open, before recovering later in the day to close marginally above the 16,000 level at 16,007. Yesterday’s price action followed a similar pattern, with the index falling sharply, only to recover later once more, and closing at 16,005. On both occasions the low of each day tested the platform of support in the 15,750 region before bouncing back. Whilst the price action is descriptive enough, with both candles closing with deep lower wicks, and signalling sustained buying at these levels, it is volume which as always validates the price action, and even for those traders who are ‘non believers’, the picture could not be clearer.

Massive volume spikes supporting a market which has reversed can only mean one thing and one thing only. The big operators and market makers are buying the market and we can now expect to see a reversal and rally higher in due course. The first level of resistance which needs to be breached is in the 16,150 region, and if this is cleared then expect to see the index climb higher to test a deeper level in the 16,300 region. A move through here is then likely to see a return to the 17,000 level once again in the longer term as the recent storm subsides and the sun begins to shine once more. The question that everyone is asking, is  this – have we seen the ‘big short’ or simply a long overdue correction? In my book, it’s the latter and for one simple reason. There was no major selling climax of volume prior to the correction itself.

By Anna Coulling

About Anna 1012 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

4 Comments on Volume signals the next move for the e-mini YM

  1. Anna,

    Loved your book on price volume analysis, it was the first book I read on trading, and the last. 2 years later I have become quite confident in my trading. Price/volume analysis combined with the theory of supply and demand are the only 2 tools I use to trade. I read the news for humor to get an idea of how the markets are being manipulated.
    Now, to quote your article:
    “Massive volume spikes supporting a market which has reversed can only mean one thing and one thing only. The big operators and market makers are buying the market and we can now expect to see a reversal and rally higher in due course.”

    Now couldn’t this mean that the big operators are both buying and selling at the same time, throughout the day? Playing the bid and ask to create large volume, in order to make it appear like a reversal! Perhaps this is the sellling climax, and they are doing it a little under the top, so it’s not so obvious! Perhaps not, but to me it looks like we have been rising on relatively low volume since 2011.

    I will finish this email by saying this – I read your book about 2 years ago, so I have been watching charts all day for about 1.5 years. I am a newbie compared to you. I just ask because you have such conviction with your statement, and I am not so sure about it. I have been watching 1 – 195 minute charts for quite a while, and I see more distribution than accumulation. How do you see things after today’s candle? Looking more and more like a trap to me. We will see what happens in this last hour! Good luck.

    Let me know.

    • Hi Jeff – many thanks for your kind comments on the volume price analysis book which are much appreciated and I’m so pleased it has helped you in your trading. Moving to your question on the current price action, the post written here really refers to the longer timeframe and not so much on an intraday basis, although on Friday I was trading this myself to the long side. The volumes that we are seeing on the daily chart at present are stopping volume and we may see further consolidation at this level before the market develops a longer term bullish trend once again. The reason for this is simple – the market makers cannot absorb all the selling pressure from such a move in one day – it takes time for the selling to be absorbed. As I explain in the book – this is the ‘mopping up’ operation after a price waterfall. With regard to wether this is a selling climax or a buying climax, it is the latter, since the market makers are unlikely to be selling after such as deep move lower of over 1000 points. If they were ‘faking’ then the proposed move lower would be climactic, and probably frighten many buyers out of the market completely – not something they want to happen.Of course in any sharp move lower, the market makers do accumulate stock which they then have to sell into a weak market, but this is generally seen as narrow spread up candles on high volume, something we have yet to see. What is also significant is that there was no selling climax in the cash market – just a single candle with ultra high volume as the pre-cursor. The motto is just enough to scare people into selling, but not enough to frighten then off for good. After all, why kill the goose that lays the golden eggs!! The next few days and weeks will be interesting and it will be no surprise to see the market retest the level created here before building a platform for a longer term return to bullish sentiment. On an intraday basis of course, the last few days have been wonderful for day traders in all markets. So some interesting times ahead. All best wishes and many thanks again and wishes you every success – Anna

  2. Hi Anna,

    Thank you for your great analysis and I must say your analysis has been spot on. I am new to VPA and I always look forward to your posts. I got your book but didn’t get the chance to read through it.

    I have a question about the prior move up from 16143 to 17300. I am looking at the volume indicator and it doesn’t show a great deal of volume and yet market kept going higher. Prior to that, when I look at the move down to 16143, it was supported by high volume. According to my understanding, the move up from 16143 shouldn’t have been that aggressive in terms of points because it wasn’t supported by high volume.
    I have noticed, you conduct the VPA only on daily charts. Is it still going to be effective if volume is analysed on 4HR or 1HR charts?

    Could you recommend some charting package/software for analysing the volume? I use regular charts (cTrader, MT4, tradingview, etc) and they don’t show the volume as presented on your charts.

    I look forward to hearing your thoughts.

    Thanks

    • Hi James – many thanks for your kind comments and I’m delighted you enjoy reading my market analysis which I enjoy writing. With regard to the move higher in equity markets, volume on any move higher does not have to be extreme. but simply average and it is the anomalies we are looking for in such a trend. What was interesting in the move. ahead of the correction, was the price action itself, which was starting to look rather tired, with narrowing spreads, before moving into the congestion phase and ultimately the reversal. At the time I wrote an article suggesting that this was similar to an escalator which had now moved from the one level to another, and had perhaps arrived at an exhaustion point, which ultimately proved to be correct. The associated volume in the up move was modest throughout, but throughout this period, there were no anomalies such as a wide spread up candle on low volume, or a narrow spread with high volume. It was only once the cash market had triggered the single shooting star candle with extreme volume on the 19th September, that the reversal began in earnest. Volume is always relative and provided the volumes are average and ‘the norm’ then market moves can and will continue for some time, unless and until we see a selling climax or buying climax. The reason that the current correction is just that – a correction – is that there has been no selling climax as a pre-cursor to the event, and this is simply a correction that has been long overdue ( IMHO!). With regard to the charts and time frames, volume price analysis can be applied in any time frame and any market. All you need is volume, so you can apply it to ETF’s stocks. futures, spot forex, bonds etc as long as there is volume reported as an indicator. With regard to charting packages, MT4 has the volumes indicator which is free and which I use in the forex trading room. NinjaTrader has the Kinetick data feed which is a paid feed, Chartsmart is another I use for US and Canadian stocks, and Sharescope is another in the UK covering a variety of markets. One of the best free charting packages is freestockcharts.com which is excellent and again reports volume. I hope the above helps and many thanks once again and wishing you every success in your own trading – Anna

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