As always, volume reveals the truth behind the price action, and whilst price action alone reveals much, on its own, it is a one dimensional approach. An image in black and white if you will. Volume adds depth and colour to this monochromatic picture and no more so than on the daily chart for the YM emini, the futures contract for the Dow Jones Industrial Average, and in particular the daily candle of the 8th January 2020.
A dramatic day and especially so for intraday traders with wonderful two-way price action, with the candle closing higher and an extreme wick to the lower body of the candle. Buying? Yes most certainly. But, how much, and volume gives us the answer simply and clearly. Extreme volume denotes very heavy buying, and therefore we can expect the market to continue higher and on towards 29,000, after this ‘refuelling stop’ and should the trade agreement between the US and China deliver in a meaningful way, this is likely to provide some further momentum taking us out and into new high ground.
However, resistance is now building in the 29,000 region, but given this is a whole number of some importance, it will be no surprise to see a pause here before the index is propelled higher in the medium term with further buying evident yesterday on very high volume.
Charts from NinjaTrader and indicators from Quantum Trading