In my analysis of the 19th October, I wrote that US equities were looking fragile with the NQ Emini my focus on the day. Here’s is the closing paragraph from that post:
Today’s price action has added further to the structural weakness now developing with yet another failed rally. The question now is where is the index likely to find any support and from a price-based perspective, there is very little with only one minor region at 11,480 and denoted with the red dashed line. More likely is a return to the volume point of control defined with the yellow dashed line at 11,270 and where the index congested for much of September.
All of the current price action has been unfolding since the Columbus Day holiday which as I have highlighted many times over the years, national holidays are a terrific time for markets to rise or fall rapidly on thin volumes as they are pushed around by the market makers in anticipation of a new campaign. Such has been the case here, with the NQ plunging to meet the volume point of control and currently trading at 11,202 at the time of writing. And this was signaled through the prism of volume price analysis which is why it is such a powerful methodology and answers the simple question, ‘where is the market heading next?’
Returning to the NQ, as we would expect it is now finding support in this area largely as a result of the extreme volume on the volume point of control histogram. This is also the fulcrum of the index (the yellow dashed line of the vpoc) and can also provide a platform of support for any bounce higher.
Meantime, with the arrival of the NQ at the vpoc, we can also expect to see congestion build in this region, and typically the price action over the next week or so is likely to reflect that of September following the sharp correction, with price oscillating around the 10,800 to 11,400 as risk sentiment attempts to rebuild following the latest shock wave.
By Anna Coulling
Charts from NinjaTrader and indicators from Quantum Trading
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