Transient Spell Of Low Vol In Forex & Equities
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Transient Spell Of Low Vol In Forex & Equities

Authored by Ivan Delgado

Ivan Delgado is a decade-long Forex Trader. Feel free to follow Ivan on Youtube. Join thousands of traders who follow Ivan's insights to increase their profitability rate by learning the ins and outs of how to read and trade financial markets. Ivan has you covered with in-depth technical market analysis to help you turn the corner.

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Scan Of The Markets

The indices show the performance of a particular currency vs G8 FX. A video on how to interpret these indices can be found in the Global Prime’s Research section.

The equity market in the US, as expressed through its bellwether instrument (S&P 500) continues to display bullish dynamics. The constructive price action happens at a time when developed countries, including the US, are laying out plans to relax lockdown measures in coming weeks amid positive stories about treatment/testing trials.

However, be on high alert, as the way the run-up in the S&P 500 is playing out, in vol terms, makes me think the bullish days might be numbered before sellers step in and re-take control. Why would I make such a claim? Because I am in the business of building up scenarios and make hypothesis that I envision could transpire, and while it’s anyone’s guess, I don’t like how this bull run is evolving.

It could be a fundamental-driven event or a technically-inspired move that tilts the balance. If the former, reading through the weekend news, Reuters carries a story that plays into my own view of a world where the hostility between the US and China go up a few notches.

Tensions between the two superpowers may arise on the basis of evidence that was always out there about China intentionally covered-up the magnitude of the crisis in what’s seen as a hugely irresponsible mismanagement of this pandemic crisis that could have been minimized if the had acted as a key global player they aim to be.

Back to the S&P 500. Why gives for the bullish days to be soon over? In my video today I explain why the vol dynamics in the S&P 500 tend to be followed by a mark-down in prices. The descending trendline drawn in the vol chart tells us we are in a compression phase with buyers far from expressing conviction, and it gets worse, as this action heads straight into a huge weekly resistance.

The picture I get in the Oil market is far less encouraging for the interest of buyers, which have been absolutely annihilated as the price breaks and accepts in its last weekly auction levels sub $20.00. This has some serious technical implications because as ‘logic-defying’ as it may sound, it tells us Oil might be headed next to the $10.00 target. Excess supply conditions is one of the main culprits.

As part of today’s technical break down, you will notice that the predominant theme in the Forex domain is the establishment of ranges in the 4h charts. What this equates to is an environment of tighter and more balanced flows that are so far causing a suppression of volatility until we can get a resolution beyond the upper/lower bound of these.

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Insights Into Market Flows

This analysis complements one’s view by accounting for multi timeframe biases. Ultimately, it is the traders’ call, via a set of entries thoroughly backtested, to enter a position. This analysis is mainly intended as a way to educate traders in upping their analytical skills.

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Recent Economic Indicators & Events Ahead

Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!

Important Footnotes

MARKET STRUCTURES

Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to the tutorial How To Read Market Structures In Forex.

SMART MONEY TRACKER 

In order to assess the market momentum of a particular asset, I’ve promoted for years the idea of using what I call the smart money tracker. The settings and the indicator can be obtained via our Discord room, where traders from all walks of life interact frequently. In this video I lay out the elements I look into to call trend directions.

SUPPORT & RESISTANCE

Unlike levels of dynamic support or resistance or more subjective measurements such as fibonacci retracements, pivot points, trendlines, or other forms of reactive areas, horizontal areas of support and resistance are universal concepts used by the majority of market participants. It, therefore, makes the areas the most widely followed. The Ultimate Guide To Identify Areas Of High Interest.

FUNDAMENTALS

It’s important to highlight that the daily market outlook provided in this report is subject to the impact of the fundamental news. Any unexpected news may cause the price to behave erratically in the short term. Monitor the event risks via Forexfactory.com & refer to Fundamentals vs Technicals In Forex.

PROJECTION TARGETS

The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection