Is Volatility Back in Town? - Jan 31, 2021

Looking at the previous week we can say YES. As written before - Jan/Feb periods are USUALLY better for day-trading then Nov/Dec. Also - Earnings Season is still ON in the US markets, and have JUST STARTED on the German market - with the SAP.


Q: What is the BEST period to take a look at Monthly charts?

A: END OF THE MONTH


Simple check of the Monthly charts of DAX, SPX and NDX:


Two down months were there after January 2018 and 2020.


What about the VIX?

Wait no more, let's dive into this Weekly chart:

Two things to observe are marked with red arrows.

#1 Supported at 20/21

#2 Down-sloping trendline


OK, so IF Volatility is high, and Indices are near ATHs, THEN -> WHAT COULD BE the targets of POSSIBLE corrective move?



ES_F Daily:

ES_F hanging there around DMA50 - widely used as GAUGE of the market strength.

>> DMA50 = Simple Daily Moving Average

POTENTIAL targets of correction IF it loses the channel AND DMA50 are those blue rectangles, representing Support zones. Red MA is DMA200.


Here is interesting wedge, SPY INVERTED chart by US trader Kevin:

(check the tweet below that one also)


NQ_F Daily chart:


Comments inside the chart.


Q: Where could price go from UPSLOPPING channels in the UP MOVING market?

A: Three versions:

1) Parabolic breakout like with channel #1

2) Sideways and range

3) Breakdown


In case of breakdown, possible targets are marked.


QUESTION:

DID YOU ADJUST your trading to the environment of elevated volatility?

IF the answer is "NO" - THEN do that ASAP.


Now, if you don't trade DAX, this is IT about US markets, and moving on to the German market.



Starting with DAX Cash Daily



DMA50 / DMA200... unfilled gaps, levels...

BUT most important thing here is turning 13,600 from Support to Resistance, and position of DMA50.


- Yeah, but Dawg there is too many stuff there...


Then move to the blank chart:


Friday CLOSE was BELOW DMA50.

Now we are getting somewhere, understanding what BEARS need to do next week - IF they mean any business at all.


Zooming OUT now, and moving to DAX W chart


Comments inside the chart.


USUAL stuff there - bull traps over previous ATHs.

Previous big pullback - October 2020 low - landed right at the confluence of Support and Fib 38.2. Where the next 38.2 is...


That is on Cash Index, now let's observe the same on FDAX.


FDAX Daily chart, zooming in from Oct 2020 low


On FDAX chart: 13,600 is now Resistance.

"Pfizer" candle, Supports and Fibs in confluence - that COULD be the targets of the down move.


Now, ALL of the above is from the angle of a Day-trader. Both BEARS and BULLS MUST have their own INVALIDATION points, if they don't want to be engaged in the "Death trade", which is basically a directional trade based solely on your opinion, without stop, in which you are feeling a ton of heat (like 500 pts of heat) and pray the dear Lord to change market direction.


IF you are interested in some long term stuff, like months from now, you will not find that here.


But, you can check Alex, analyst and trader from Austria. His work:




"Weekend" quotes:



That would be it for this Weekly blog.

Have a nice day - and prepare yourself for Monday.

 

In short term trading it is very important to properly understand context heading into every day, to know from which side wind is blowing - who has the short term control, and which side will be forced to liquidate IF and WHEN market hold above or below a certain level. What is the level of volatility, what can we expect from any particular day, what market already done in premarket session, what possible setups can be available, and so on... the things that we constantly learn in the DAILY DOSE OF DAX.

Cheers, Relja a.k.a. StrayDog