Ahead of this week’s key FED decision and statement, once again it’s the NQ emini which is leading the principle US equity markets higher with the recent correction now appearing to be over, and whilst the YM emini is trading lower in the session, both the NQ and the ES have moved firmly higher. For the NQ, the platform of support in the 4270 area remained untested in the reversal lower, with the index finding some traction in the 4300 area, with yesterday’s wide spread up candle closing above the short term congestion phase, and today’s price action continuing to drive the market higher as the US dollar pauses at the 100 level ahead of Wednesday’s FOMC.
As always, volume reveals the true price, and indeed it was the general decline in volume coupled with the narrowing price action of late February which alerted VPA traders to the structural weakness in equities, and the potential for a correction, something I anticipated in my analysis of March 9th – Simply a market correction for US indices. Volume also confirmed this was not a selling climax, as many had suggested, but simply reflecting a market that was exhausted. The volume profile is also sending some strong signals at present, and perhaps the most significant candle on the chart is the wide spread down candle of the 10th March, with the resulting volume only just above average. Compare this to similar days in December, January and February where the associated volumes were significantly higher, and by some distance. This in turn suggests a lack of insider selling, and confirming the fact that bullish sentiment remains firmly in place for the time being.
The FOMC meeting will, of course, inject some short term volatility, with the US dollar continuing to remain bullish. However, risk on sentiment has returned, and provided the index holds above the strong platform around the 4300 price point, then the NQ should retest the 4450 region once more, and ultimately break through in due course.
By Anna Coulling