It was no surprise to me – still NO selling climax!

YM - Emini daily chart
YM – Emini daily chart

I wrote a post last week entitled the Alice in Wonderland World of the markets in which I confidently stated that the present market correction, particularly in indices and equities was just that, and not as many were forecasting, what I have christened “The Big Short”. The question I was asked at the time was how could I be so confident in my appraisal of the market. And the answer is simple – its volume.

As with the previous market correction of 19th September, neither of these moves have been preceded by a ‘selling climax’ which always heralds the arrival of a major reversal. The characteristics of a ‘selling climax’ (which you can read about in detail in my book ‘A Complete Guide to Volume Price Analysis’ – 134 5* reviews) is that phase of price action where we have an extended period of price congestion contained within a relatively narrow range. The price action is punctuated with a variety of narrow spread candles, shooting star and doji candles, all accompanied with high or ultra high volume. It is this crucial combination which signals the big operators are preparing to take the market down and fast. However, in anticipation of the move lower we will also need to see a number of low volume tests to confirm any final buying (by the retail traders and investors) has been absorbed before the main move can commence.

On neither occasion, in the reversal of September nor in the move of the last two weeks, has any selling climax been in evidence, either in the futures markets or in the related cash markets, all of which confirmed this was simply a short term correction, and not a major top. For the YM Emini on the daily chart, it was the deep area of support in the 16,950 region which duly provided the platform for the recovery with the FOMC proving to be the catalyst for the present recovery. This also confirms the nonsense written about oil being the primary driver of the current move lower for equities. Oil has continued lower, and is set to move lower still (and possibly down towards $43 per barrel), yet the markets have bounced back. The supposed relationship between oil and equities has simply been the mechanism the insiders have used as a trigger for further accumulation, aided and abetted by the media.

That operation now complete, the markets will continue to move higher, fueled by the panic selling which resulted from the sharp move lower. The Santa Claus rally is firmly back on track with Santa’s sled now extricated from the snow drift, and with the YM now trading at 17,810, and looking set to regain the 17,914 high of early December equities and indices should end the year in positive mood. For 2015, expect more of the same, and as always when the big short does finally arrive, you will be the first to know!

By Anna Coulling

About Anna 1011 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.

5 Comments on It was no surprise to me – still NO selling climax!

    • Hi Ross – many thanks for your enquiry – I do not have an email list as such but you are welcome to subscribe to the feee trading rooms – one for forex and one for day trading. You can find the I’ve added the link here and look forward to seeing you there – all best wishes Anna

  1. The US dollar index, commodity index (GCC), equities and Bond yields all went down in that week. Seems like as equities were being sold off, money was being parked temporarily in bonds, ready to move back in on the lows.

  2. Hi Anna,

    During the Christmas holidays I wanted to polish my trading skills and there was no better way other than reading your book on VPA. I haven’t finished reading it yet but so far I have enjoyed it a lot. I will drop you an email once I have gone through the whole book. I have watched videos and read articles to gain trading knowledge but never read any trading book before. The only reason I am reading this book is because you are the author and you have always made great calls. Your analysis is always logical without any fancy indicators like RSI, MACD, etc.

    I am going through your analysis to test my theoretical knowledge and probably I will be bugging you with my questions in the future. I hope you don’t mind.

    After the last correction, we have 3 up candles but volume is falling in the move up especially on the second candle, we have relatively low volume but candle has a large spread. Isn’t that an anomaly and the move up is not ‘genuine’? Secondly, prior to the move up, there was no real indication of stopping volume or hammer/reversal candle and last down candle has long upper wick with high volume showing selling pressure. Although, the down move couldn’t be classed as a selling climax but how could we be certain that the correction was over?

    I look forward to hearing from you.

    James

    • Hi James – first of all a very happy New Year and thank you for your very kind comments which are much appreciated, and I’m delighted that you are enjoying the VPA book and finding it useful. Thank you also for your kind comments on my market analysis – I do try my best to make the right calls ( not always correct) but these are the markets that I trade myself and the analysis that I write here is also what I trade, so I have a vested interest in being correct:-) With regard to your question, this is an interesting one and goes to the heart of volume price analysis, which is all about the relative aspects of volume, and herein lies the issue. We always have to be aware of the time of day or the time of year when viewing volume. Volumes during the run up to holiday periods, and indeed over holiday periods can and do fall off dramatically as traders and investors close their books for the year. This results in low volumes and in looking at a chart, without referencing the time of year it is easy to forget that the volume has to be seen in the context of the time of year. The same is true when considering the forex markets where a high volume in the Asian session would be low volume in the London and European session. Equally when considering a chart, the physical exchange may be closed for a holiday whilst the electronic market may be trading. Xmas is one of those periods when volumes can and do fall dramatically and as such we do have to bear this in mind when looking at the chart. Under ‘normal’ circumstances you would be 100% correct with an up move on falling volume a classic signal of short term weakness. But as yet we have no selling climax, so another correction now in prospect. I hope the above helps and many thanks once again and wishing you every success in your trading, and if I can help further please just drop me a line here – kind regards Anna

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