Anna Coulling > Stock Market Analysis > Indices > SPY VPA Analysis: Daily & Weekly Charts Show Massive Pressure Building – Is The Boil About to Burst?

In this video I break down the SPY using Volume Price Analysis (VPA) on the daily and weekly charts. See the building pressure and why the chart looks like a pressure cooker ready to burst. Key levels, volume signals, and what it means for the next move in this must-watch trading analysis

00:21

Live stream intro and market overview – SPY VPA Analysis

00:21

The live stream begins shortly after market open, focusing on the current complex market environment influenced by technical and geopolitical factors. The hosts plan to analyze charts and Volume Price Analysis (VPA) to understand market behavior. They acknowledge the recent challenging trading conditions and aim to interpret current trends and potential future developments.

01:39

Focus on SPY VPA Analysis and market congestion

01:39

The speaker discusses analyzing the SPY VPA Analysis ETF and its futures, along with the ES and ENQ markets, focusing initially on the SPY. They highlight ongoing congestion across major indices, including the NASDAQ and S&P 500, emphasizing that the SPY has been in a congestion phase since hitting its all-time high around December 25. The main question posed is whether this congestion indicates a distribution phase in the market.

03:00

Sumo candle and price effort analysis

03:00

The segment discusses the concept of reaccumulation in price action, highlighting periods where significant volume and trading effort occur without substantial price movement. It introduces the ‘sumo candle,’ which exemplifies Wyckoff’s third law of effort versus result, showing heavy trading effort that results in minimal price change, indicating price being pinned at certain levels.

04:13

Impact of options market on price levels

04:13

The speaker discusses how Volume Price Analysis (VPA) provides insight into price action and volume but doesn’t explain the reasons behind certain price levels. One key factor influencing these levels is the options market, which was previously inaccessible and largely unknown to retail traders. Historically, the options market was mainly a hedging tool used by specialists like mathematicians and analysts, disconnected from futures, forex, and stock markets. However, this has drastically changed, and now the options market significantly influences stock market movements. The interaction between market makers for stocks and those managing options creates complex dynamics that affect price behavior at critical levels.

06:02

Weekly chart review of the congestion phase

06:02

The speaker discusses the complexity of market dynamics, highlighting that multiple groups with different agendas and important levels create tension. This results in having to manage interactions with two sets of insiders, a topic intended for deeper exploration in future streams. For now, the focus shifts to analyzing the weekly chart for clearer insights.

06:35

The speaker references previous analyses shared on social media and their blog, focusing on a past congestion phase from November to March 24-25. This historical congestion phase is used to better understand the current market situation, emphasizing the value of the weekly chart in explaining recent price action.

07:15

The current market shows a breakdown from a congestion phase, characterized by generally below-average volume, consistent with typical distribution periods. The speaker notes the importance of volume in identifying the market state, though it’s still uncertain if the market is ending distribution or not.

07:48

The below-average volume observed in the congestion phase is partly explained by events such as OPEX and the Christmas period, which typically reduce trading activity. A recent volume increase coincides with the market breakdown, signaling a possible shift in market behavior.

08:19

Volume anomalies and market pressure

08:19

The segment discusses a comparison of price action and volume patterns in a market context, highlighting a narrower price range with high volume but minimal price movement, described as ‘sumo candles’ with tiny spreads despite heavy trading. The speaker notes low energy and below-average volume during a congestion phase, indicating pressure building without a breakout. They reference a past event related to OPEC and question whether a similar market reaction will occur again, considering the current buildup of pressure and potential triggers for future movement.

10:04

Cause and effect in congestion breakout

10:04

The speaker discusses the concept of market congestion and consolidation phases, referencing Woff’s second law of cause and effect which suggests that a longer congestion period leads to a more significant market move once it breaks out. They highlight a key difference between current and past congestion phases, termed ‘pressure,’ and question whether upcoming market movements could be more dramatic than those seen previously. The focus is on the importance of critical price levels and whether market makers and option dealers will defend these levels to manage risk and hedge their positions. The goal of option dealers is to have options expire worthless, indicating their influence on market stability. The segment concludes by emphasizing the critical nature of the current market environment as it approaches the end of the month.

12:22

Geopolitical influences and oil price

12:22

The discussion focuses on the impact of geopolitical events on market volatility, highlighting the close relationship between oil prices and the VIX index. The speaker emphasizes monitoring oil prices as a key indicator. They analyze recent oil price movements, noting a significant volatility candle that created a dominant price range which has not been breached. Current price action remains within this range, indicating uncertainty and the need for key levels to be broken to establish clear market direction. Additionally, even if geopolitical tensions ease, the damage to oil infrastructure will delay supply normalization.

14:10

Oil producers’ break-even price challenges

14:10

The speaker explains the concept of the break-even price for oil producers, which is the minimum price needed to make drilling and selling oil viable. Currently, the cost of oil has been low, below $60 a barrel, which benefits retailers but is problematic for producers. Even major producers like Saudi Arabia now have much higher break-even prices, closer to $100 a barrel, due to their economic commitments and country transformation projects. This price dynamic affects inflation and consumer costs, creating a balance producers must manage between keeping prices viable for production yet not so high as to trigger inflation. Geopolitical factors, such as tensions in Iran, also influence supply and demand in the oil market.

16:02

Market transition and uncertainty

16:02

The speaker discusses the current macroeconomic environment, describing this year as a transition period compared to last year’s straightforward market rally. They note the presence of market congestion and uncertainty, emphasizing the need to continuously monitor charts to understand the evolving situation. The segment ends with a handover to David, who is about to analyze futures, specifically the ES and SPY charts, while briefly highlighting important details on the daily and weekly charts.

17:20

Daily chart anomalies and 200 MA importance

17:20

The speaker discusses anomalies in market volume around specific days, highlighting a significant volume spike on Monday comparable to Friday’s. They emphasize the importance of the 200 moving average (MA) on the daily chart as a key technical indicator widely respected and followed by traders, contributing to market behavior as a self-fulfilling prophecy. The combination of technical indicators and underlying market factors is crucial to understanding the current market situation. Additionally, Monday saw a notable volatility spike, referred to as the ‘FOMO candle,’ driven by momentum in pre-market trading.

19:17

Pre-market FOMO candle and hourly chart

19:17

The speaker discusses pre-market trading volume, noting it is substantial but less than at the official market open. They switch to viewing the hourly chart to provide context on shorter time frames. An important candle formed during Monday’s pre-market session is highlighted, with the price remaining confined within levels derived from the daily chart. The daily chart shows irregularities, making the price movement uncertain and seemingly pinned within a narrow range.

20:33

Price pinned and need for market correction

20:33

The speaker discusses current market levels around 650 to 660 and emphasizes the need for a market correction, comparing it to a boil that must be lanced. They suggest that although daily fluctuations are challenging, a correction is inevitable since markets cannot rise indefinitely. Traders are advised to use hourly charts, especially observing pre-market and opening candles, to gauge market direction. Despite multiple efforts, there is little progress, indicating building pressure and market anomalies around the 200 moving average, making the situation complex.
By Anna Coulling – creator of volume price analysis

By Anna Coulling – creator of volume price analysis