{"id":19749,"date":"2022-05-24T07:30:08","date_gmt":"2022-05-24T11:30:08","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19749"},"modified":"2022-05-24T07:30:08","modified_gmt":"2022-05-24T11:30:08","slug":"a-triple-bottom-hides-within-the-volume","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/a-triple-bottom-hides-within-the-volume\/","title":{"rendered":"A \u201cTriple Bottom\u201d Hides Within the Volume"},"content":{"rendered":"

Technical analysis<\/a> – the study of prices and patterns – has become a very accessible tool for investors.<\/p>\n

Most people pull up a chart, take a glance or draw some lines, and in a matter of seconds formulate a decisive conclusion about the market.<\/p>\n

And it’s not just people starting out… institutional investors do the same.<\/p>\n

Ask them what they think of an index, stock, or commodity and that’s the first thing they tend to do.<\/p>\n

But the lines on a chart can be deceiving…<\/p>\n

To get an edge during these market conditions, a look deeper can go a long way.<\/p>\n

For instance, by combining price action with<\/em> a volume study… true support levels are illuminated.<\/p>\n

That’s why I use a technical study called a volume profile that shows how much volume was traded at every price.<\/p>\n

We used this tool last year for our recommendation to buy bitcoin at $30,000 on May 27<\/a>, and then to sell it at $61,000 on November 19<\/a>.<\/p>\n

And it’s why the 3900 level on the S&P 500 is now looking stronger every day.<\/p>\n

To see what I mean, take a look at the chart below showing a breakdown of the S&P 500 futures price\/volume distribution during the last month…<\/p>\n

\"Chart\"<\/div>\n

It distributes price according to how much volume traded at each level on an intraday basis.<\/p>\n

The biggest “bump” represents the price with the most volume traded… or the price\/volume mode.<\/p>\n

I marked the mode for three recent days of particular interest during this recent market selloff (blue arrows).<\/p>\n

The first is May 12 when we made new lows… which was followed by a three-day rally but miserably rejected on Thursday.<\/p>\n

Anecdotally, Thursday’s selloff is when a lot of people who were looking for a rally threw in the towel and gave up on a rebound.<\/p>\n

But if you look at the volume distribution on Thursday, you can see all it did was retest that same 3900 price\/volume mode from May 12.<\/p>\n

Most importantly, was the wild price action on Friday.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Friday’s big option expiry shed some light on how serious the bears<\/a> really are at these levels – and it didn’t disappoint.<\/p>\n

By the looks of things – specifically the fact that the market rallied so much right<\/em> at the last moment on an options expiry day – it seems this was due to a “gamma squeeze.”<\/p>\n

A gamma squeeze is when the underlying stock’s price goes up quickly within a short timeframe…<\/p>\n

And it revolves around an important market participant – the options market maker that maintains an orderly environment in the market.<\/p>\n

So, when put options<\/a> are bought (either for downside protection or price speculation) the market maker is the one selling them.<\/p>\n

To hedge their positions, the underlying stock is sold by market makers – placing pressure on prices to the downside.<\/p>\n

And the reverse happens when these puts are sold.<\/p>\n

But when there are large trading volumes in one direction in a short time (like on Friday) the market maker must close out its positions on top of what the market is doing… leading to a large spike in prices.<\/p>\n

And it all settled at the 3900 level on the S&P 500.<\/p>\n

It’s the result of a lot of paper being pushed around.<\/p>\n

Which tells me, the bears aren’t that<\/em> bearish… at least enough to push it through the price\/volume mode set on May 12, May 19, and now May 20.<\/p>\n

If the follow-through in the market – which we’re seeing now with the S&P 500 up 2% yesterday – moves higher or at least doesn’t give anything back… we may start hearing technical analysts call this a “triple bottom” – a bullish<\/a> development for the market.<\/p>\n

But as I wrote last week<\/a>, for now it looks like we’ll be range bound between 3900 and around 4200 until we get more information about the economy.<\/p>\n

For traders trying to play this range, I would exit a position in the S&P 500 if it closes<\/em> below that level… not merely trades under it on an intraday basis.<\/p>\n

As we’ve seen from the recent price action, the market is getting thrown around like a ragdoll… which means closing price levels are more important than ever. So far… the market hasn’t breached this line.<\/p>\n

Regards,<\/p>\n

Eric Shamilov
Analyst, Market Minute<\/em><\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

Has this volume study changed your perspective on the current market situation?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

This level just became even more important\u2026<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[13],"newsletter-type":[],"ticker":[],"class_list":["post-19749","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-eric-shamilov"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19749","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19749"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19749\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19749"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19749"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19749"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19749"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19749"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19749"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19749"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}