Why Is Understanding Market Structure Overpowered?

Traders' Opinions

One of the biggest newbie mistakes in trading is focusing on getting the "perfect" entry through a myriad of complimenting indicators--hoping that it'll do the job of pointing out the best entry point for your trading position. Don't get me wrong, I've done that mistake before too. But what if I tell you that all you need to conquer the market is through understanding the higher timeframe market structure?

In this article, we will be taking a head-first-dive to understanding market structure. So you won't be at the wrong side of the market ever again!

Market structure is a section of technical analysis which considers the overall trend and size of impulse price traverses. One of the pioneers of breaking down Market structure is Richard Demille Wyckoff, renowned as one of trading's "Titans". He was well-known on introducing theories and techniques that shared highly probable trading methodologies--contributing much of the success through characterising the market's movements. Though we won't be touching the complexities of Wyckoff's method in this article, we will be taking on easy-to-grasp concepts that'll set you off in your trading journey.

To start, if there's one thing that the market does is that it needs to breathe. Though it is an intangible place, it is still managed by living beings that has an overall sentiment --and when those ideas meet, it pushes the price to a certain direction allowing it to move up and down. In a way, this is how the market inhales and exhales. For us to understand clearly, an illustration below will be provided Why Is Understanding Market Structure Overpowered?_1

Why Is Understanding Market Structure Overpowered?_1

In breaking down market structure, the up and down movements are called lows and highs. These lows and highs will be further classified depending on the dominant trend of the market. In an uptrend/bullish market, these are called higher highs (HH) and higher lows (HL). In a downtrend/bearish market, these movements are called lower lows (LL) and lower highs (LH). Why Is Understanding Market Structure Overpowered?_2

Why Is Understanding Market Structure Overpowered?_2

Identifying whether the market is printing HL & HH or LL & LH is essential as it allows us to see as to which structure is the market willing to break. In a bullish market structure, it is expected for Resistance zones to be weak considering that price is dominated by bulls. Likewise, if the market presents a bearish market structure, price is anticipated to break Support zones as bulls will be offering little involvement to the support areas.

Why Is Understanding Market Structure Overpowered?_3

In an actual chart, this is how a trade based off from understanding market structure would look like

Why Is Understanding Market Structure Overpowered?_4

That's an easy 5 Risk-to-reward Ratio trade just from targetting the weak structure (Support zones in this case)

The breaking of previous Lows or highs will now produce a narrative as to where price wants to go. If price breaks the highs, it is for certain that the lows will be protected and likewise is the same for the opposite. Understanding which structure will be respected allows us to increase the probability of our positions. In a way, we get to trade on the right of the market.

But what if price suddenly breaks a protected structure? Well.. We'll be discussing that in the next article.

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Comments

Add to Favorites

Devin

All eyes are on US inflation data today. Investors feel the heat before today's inflation print. All three major indices extended losses yesterday, as the S&P500 dropped 1.70% and slipped again below its 50-DMA, while Nasdaq, which is the most sensitive to the rates lost close another 2.20%, bringing the past five-day losses to above a trillion US dollars. A CPI figure at or ideally below expectations could cool down the recent selloff, but a figure above expectations will likely further boost the Fed hawks and weigh on the equity appetite.

The consumer prices in the US are expected to print an advance to the eye-watering level of 8.5% in March, from 7.9% printed a month earlier. And of course, there is a chance that we see a higher print on the back of higher energy and commodity prices, rising wages and rising rents.

Fed's Loretta said that price growth will probably remain above the 2% mark into next year, though the overall trajectory will be downward. A more relevant question is, will they continue progress higher from the actual levels – and despite the Fed tightening, or will they top before they hit the 9 or even the 10% mark, before they start easing. How fast the Fed could bring down inflation that is mostly caused by supply side problems, by restricting demand, and how will the rising inflation and the rising rates to tame inflation will impact the market?

Bitcoin, a proxy for Nasdaq?

Bitcoin slipped below the $40K mark as the broad risk selloff tainted on the mood in cryptocurrencies, as well. It is now clear that Bitcoin trades parallel to the risk assets, rather than a safe haven. In fact, the latest data even shows that the 90-day correlation between Bitcoin and Nasdaq advanced to the highest levels on record, near 60%.

Bitcoin is still not the digital gold, it's more of a crypto-proxy for Nasdaq apparently.

Gold up

Gold advanced to $1970 per ounce as a broad-based risk selloff benefited to the yellow metal on Monday. The rising US yields is not fundamentally positive for gold appetite, as it increases the opportunity cost of holding the non-interest bearing gold, but the bond markets is simply not a safe option right now, as the selloff will certainly extend on Fed's tightening plans and the rising geopolitical tensions, as the West is willing to arm Ukraine – given that sanctions do little to get Putin out of the country, appears to be giving some support to the yellow metal.

Crude oil rebounded after extending losses below $93pb yesterday. We will probably see an increased appetite from dip buyers approaching the $90pb psychological support.

In the FX

The US dollar index consolidates a touch below the 100 mark, as investors love the US dollar either for being a good reserve asset, a safe safe-haven, or simply a good investment. A recent poll by Bloomberg Markets Live survey shows that 56% see the dollar gaining more this quarter versus less than 30% that expect a drop. So, the stronger dollar is the baseline expectation.

The wider divergence between the more hawkish Fed and the relatively little responsive ECB continues weighing heavily on the EURUSD. European consumer prices are rising at a pace which is as scary as the US', while the wages grow much less than the US meaning that the Europeans experience a bigger loss for their purchasing power. Bloomberg Economics writes that their base case scenario is that the energy costs would remain elevated in quarters to come, which would push inflation to a peak above 8% in July and squeeze households' spending power.

The ZEW index due today will confirm how fast the sentiment deteriorates in Germany. An ugly figure could further weigh on the single currency, but we will probably see a floor into the 1.08 level in the EURUSD before Thursday's ECB decision, just in case the ECB would sound more hawkish.

Source: Swissquote Bank

Risk Warnings and Disclaimers

Comments

Add to Favorites

Kevin Du

Crypto Trading Volume in India Plunges Further

Cryptocurrency trading volume in India continues to slide after the government began taxing crypto income at 30% without allowing any loss offsets or deductions.

According to crypto research firm Crebaco, cryptocurrency trading volumes have fallen from last week across all major exchanges, Moneycontrol reported. Wazirx suffered a 72% drop in trading volume, Coindcx 52%, and Zebpay 59%.

In addition, MobiKwik reportedly withdrew its services across exchanges on April 1 amid unclear regulations. Mobikwik was one of the preferred methods of payment to purchase cryptocurrencies at exchanges.

A crypto exchange executive was quoted by the publication as saying:"Mobikwik did not give any specific reason for withdrawing its services. We were just told that they won't be partnering with exchanges anymore."

Last week, the Nasdaq-listed crypto exchange Coinbase announced that it has fully launched in India and users could transfer funds to buy crypto using the Unified Payments Interface (UPI) system. However, the National Payments Corporation of India (NCPI), which created UPI, responded by stating that no crypto exchange is using the UPI system.

On July 1, another damaging tax will go into effect. Crypto transactions will be levied a 1% tax deducted at source (TDS). An Indian parliament member recently explained why this tax will kill the crypto industry.

Meanwhile, the Indian government is still working on a framework for crypto. Finance ministry officials are reportedly consulting with international organizations, including the International Monetary Fund (IMF) and the World Bank, as well as the Reserve Bank of India (RBI) and other domestic regulators.

Source: Bitcion.com

Risk Warnings and Disclaimers

Comments

Add to Favorites

Damon

Russia-Ukraine Conflict

War Set to Cut Ukraine's Economy by Almost Half_1

The institution forecasts Russia's invasion will cause more economic damage across eastern Europe and parts of Asia than the coronavirus pandemic.

The conflict in Ukraine has shut half of the country's businesses and slashed exports, the World Bank said.

Anna Bjerde, the bank's vice-president, said Ukraine needed "massive financial support immediately".

The bank has sent almost $1bn of assistance to Ukraine so far and has promised a further $2bn in the coming months.

It said the closure of Black Sea shipping from Ukraine had cut off some 90% of the country's grain exports and half of its total exports.

Ukraine is the world's biggest exporter of sunflower oil and the shutdown of exports has affected global food prices.

The World Bank said the war had made economic activity impossible in large parts of the country, disrupting farming and harvest operations.

"The magnitude of the humanitarian crisis unleashed by the war is staggering. The Russian invasion is delivering a massive blow to Ukraine's economy and it has inflicted enormous damage to infrastructure," said Ms Bjerde.

The bank said the 45.1% contraction estimate excluded the impact of physical infrastructure destruction, but said this would hamper future economic output further.

While Ukraine's economy will suffer the most damage by the war, the World Bank said Russia's economy had been already plunged into a deep recession as a result of sanctions from Western countries.

The sanctions have ranged from cutting ties with Russian banks and targeting Russian politicians and oligarchs to banning luxury goods imports and flights.

The bank projected Russia's economy would contract by 11.2% in 2022 as the sanctions bite.

But while the US has banned all Russian oil and gas imports, the EU, which gets a quarter of its oil and 40% of its gas from Russia, has stopped short of such action.

EU countries continue to pay Moscow up to €800m (£674m; $884m) for energy every day, which amounts to an estimated 40% of the Kremlin's income.

The EU has proposed a plan to make Europe independent from Russian fossil fuels before 2030.

The World Bank said that in addition to Russia and Ukraine, Belarus, the Kyrgyz Republic, Moldova and Tajikistan were projected to fall into recession this year.

It said growth projections had been downgraded in all economies because of the war, with weaker-than-expected growth in the euro area.

"The Ukraine war and the pandemic have once again shown that crises can cause widespread economic damage and set back years of per capita income and development gains," said Asli Demirgüç-Kunt, World Bank chief economist for Europe and Central Asia.

Source：BBC

Risk Warnings and Disclaimers

Comments

Add to Favorites

Owen Li

Russia-Ukraine Conflict

President Joe Biden and Indian Prime Minister Narendra Modi held a "candid exchange of views" on Ukraine on Monday, with the US leader asking Mr. Modi not to accelerate the buying of Russian oil as many nations try to deny Moscow energy income.

Mr. Biden told Mr. Modi that the US could help India to diversify its sources of energy, according to White House press secretary Jen Psaki.

India receives little of its oil from Russia, but recently made a major purchase as other democracies are trying to isolate Russian President Vladimir Putin and starve Moscow of foreign cash as it wages war in Ukraine.

"The president also made clear that he doesn't believe it's in India's interest to accelerate or increase imports of Russian energy or other commodities," Ms. Psaki said.

The South Asian nation is continuing to buy Russian oil despite Mr. Biden's pressure on world leaders to take a hard line against Moscow.

A senior US official said there was no "concrete ask and concrete answer" on energy imports during the "warm and productive" meeting.

India has bought at least 13 million barrels of Russian crude oil since the country invaded Ukraine on February 24, lured by steep discounts after western sanctions on Russian entities, Reuters reported.

The two leaders also discussed the "destabilizing impacts" of Russia's war against Ukraine, with a particular focus on global food supply, the White House said.

The hour-long online meeting topped two days of "2+2" ministerial talks between Washington and New Delhi.

Secretary of State Antony Blinken hosted Indian Minister of External Affairs Dr S Jaishankar, and Secretary of Defence Lloyd Austin met Indian Defence Minister Rajnath Singh at the Pentagon.

"The [Biden-Modi] meeting was warm and productive and they covered lot of ground," the senior US official said, adding the agenda included the Indo-Pacific partnership, consultations on Russia, and defence and technology ties.

Mr. Biden and Mr. Modi failed to reach a joint condemnation of the Russian invasion when they last spoke in early March at a meeting of the "Quad" alliance of the US, India, Australia and Japan.

Biden Urges Modi Not to Accelerate Russian Oil Purchases_1

But the senior US official expressed a conciliatory tone when it came to energy sanctions.

"We haven't asked India to do anything in particular … we know that not all countries will be able to do what we've done," the official said.

Last week, New Delhi abstained when the UN General Assembly voted to suspend Russia from its seat on the 47-member Human Rights Council over allegations of war crimes.

The Biden administration warned that any country actively helping Russia to circumvent international sanctions would suffer "consequences".

Mr. Biden and Mr. Modi struck a common tone on the need to deepen the bilateral relationship and humanitarian efforts in Ukraine.

"I not only appeal for peace, but also suggested that there be direct talks between President Putin and the President of Ukraine [Volodymyr Zelenskyy]," Mr. Modi said.

Before the video call, Mr. Austin hosted Mr. Singh at the Pentagon and hinted at expanding co-operation in space and cyber security.

A Space Situational Awareness Memorandum of Understanding was set to be signed later on Monday to protect the satellites of the two countries.

Biden Urges Modi Not to Accelerate Russian Oil Purchases_2

Aparna Pande, director of the Initiative on the Future of India and South Asia at the Hudson Institute, saw Mr. Biden's direct involvement in the 2+2 ministerial as significant.

"It's important symbolically that the US president held a meeting with Prime Minister Modi and elevated the ministerial a notch," Ms. Pande told The National.

She said the goal of the Washington meetings would be to reach a formula where the two sides could boost Indo-Pacific co-operation but "agree to disagree" on Russia.

"India is still trying to do what it has always done for the last seven decades plus, which is stay in the middle," Ms. Pande said.

She said the issue of secondary sanctions on Russia would be the hardest to navigate in the Ukraine crisis.

Secondary sanctions are those imposed on a country, person or entity for doing business with a sanctioned entity.

Ms. Pande thought New Delhi would probably escape such sanctions, but said they may hit Indian corporations trying to do business with Russia.

Richard Rossow, chairman of US-India Policy Studies at the Centre for Strategic International Studies, regarded the sanctions issue as one that possibly threatened the direction of the bilateral relationship.

"We're walking on very, very thin ice right now, where the United States would like to see India take a different position on the Russian invasion of Ukraine," Mr. Rossow told The National.

The other major issue will be India's acquisition of the S-400 Russian missile defence system.

While Ms. Pande said the S-400 debate is now years old and will be overshadowed by the new sanctions, Mr. Rossow said the magnitude of that defence sale makes it even more controversial after recent events.

In 2016, India signed a $5 billion deal with Russia for the S-400 system, a year before The Countering America's Adversaries Through Sanctions Act law came into effect, penalising major transactions with Russia.

Now, India is seeking a waiver for avoiding Caatsa sanctions because it bought the system before the law was signed. But divisions linger within the administration and Congress on the matter.

"This is a big wrestling match," Mr. Rossow said, as the two partners try to balance the overarching interests in countering China, boosting technological co-operation and holding the line against Russia.

Source: The National News

Risk Warnings and Disclaimers

Comments

Add to Favorites

Devin

The USD/JPY pair caught aggressive bids on the first day of a new week and jumped to its highest level since June 2015, around the 125.75 region on Monday. The Bank of Japan cut its assessment for most regional economies and Governor Haruhiko Kuroda warned of very high uncertainty over the fallout from the Ukraine crisis. This, along with the widening of the US-Japanese government bond yield differential, drove flows away from the JPY and acted as a tailwind for spot prices amid sustained US dollar buying interest.

The BoJ has repeatedly said that it remains ready to use powerful tools to avoid long-term interest rates from rising too much. In fact, the Japanese central bank offered last month to buy unlimited 10-year Japanese government bonds to defend the 0.25% yield cap. This, in turn, limited the upside in the Japanese government bond. Conversely, the yield on benchmark 10-year US government bond jumped to the highest since December 2018 amid firming expectations for a more aggressive policy tightening by the Fed.

The markets have been pricing in a 50 bps Fed rate hike move for each of the next two policy meetings. The bets were reinforced by comments from Chicago Fed President Charles Evans, saying that an accelerated pace of interest-rate increases to combat inflation is worth debating. Adding to this, worries that the recent surge in commodities will put upward pressure on already high consumer prices remained supportive of elevated US bond yields and assisted the USD to hold steady near its highest level since May 2020.

The pair rallied nearly 175 pips from the daily low around the 124.00 round figure, though extremely overbought conditions on short-term charts kept a lid on any further gains. Investors also preferred to wait on the sidelines ahead of the latest US consumer inflation figures, due for release later this Tuesday. This, along with the prevalent risk-off mood, led to subdued/range-bound price action through the Asian session. The fundamental backdrop, however, remains tilted in favour of bulls and supports prospects for additional gains. USD/JPY Analysis: Bulls Take a Brief Pause, Await US CPI Before Placing Fresh Bets_1

USD/JPY Analysis: Bulls Take a Brief Pause, Await US CPI Before Placing Fresh Bets_1

Technical outlook

From a technical perspective, the overnight swing high nears the June 2015 peak, around the 125.85 region, and should now act as a pivotal point. This is closely followed by the 126.00 round figure and resistance near the 126.20 area. Some follow-through buying will reaffirm the constructive outlook and set the stage for a move towards the 127.00 mark for the first since 2002.

On the flip side, any meaningful slide now seems to find decent support near the 125.00 psychological mark. A convincing break below might trigger some long-unwinding trade and drag spot prices back towards the 124.55 support zone, marking the lower end of an upward sloping channel extending from the March 31 low. The next relevant support is pegged near the 124.00 mark, which if broken decisively should pave the way for a deeper corrective pullback.

Source: FXStreet

Risk Warnings and Disclaimers

Comments

Add to Favorites

Damon

Sticker Shock: March Inflation Likely Set New 40-year High_1

The government's consumer price index being released Tuesday is expected to show that prices shot up 8.4% from 12 months earlier, according to economists surveyed by the data firm FactSet. That would mark the fastest year-over-year inflation since December 1981. And it would surpass the 7.9% 12-month increase in February, which itself set a 40-year high.

Economists have also forecast that from February to March, consumer prices jumped 1.1%. That would be the sharpest month-to-month jump since 2005.

The March numbers will be the first the capture the full surge in gasoline prices that followed Russia's invasion of Ukraine on Feb. 24. Moscow's brutal attacks have triggered far-reaching Western sanctions against the Russian economy and have disrupted global food and energy markets. According to AAA, the average price of a gallon of gasoline — $4.11 — is up 44% from a year ago, though it has fallen back in the past couple of weeks.

The escalation of energy prices has led to higher transportation costs for the shipment of goods and components across the economy, which, in turn, has contributed to higher prices for consumers.

“The war in Ukraine has complicated the inflation outlook,” noted Luke Tilley, chief economist at Wilmington Trust.

Economists point out that since the economy emerged from the depths of the pandemic, consumers have been gradually broadening their spending beyond goods to include more services. A result is that high inflation, which at first had reflected mainly a shortage of goods — from cars and furniture to electronics and sports equipment — has been gradually emerging in services, too, like travel, health care and entertainment.

If the March price figures come in as expected, they will solidify expectations that the Federal Reserve will raise rates aggressively in the coming months to try to slow borrowing and spending and tame high inflation. The financial markets, in fact, now foresee much steeper rate hikes this year than Fed officials had signaled as recently as last month.

The central bank's rate increases will make loans sharply more expensive for consumers and businesses. Mortgage rates, in particular, though not directly influenced by the Fed, have rocketed higher in recent weeks, making home buying more expensive. Many economists say they worry that the Fed has waited too long to begin raising rates and might end up acting so aggressively as to trigger a recession.

For now, the economy as a whole remains solid, with unemployment near 50-year lows and job openings near record highs. Still, rocketing inflation, with its impact on Americans' daily lives, is posing a political threat to President Joe Biden and his Democratic allies as they seek to keep control of Congress in November's midterm elections.

Economists generally express doubt that even the sharp rate hikes that are expected from the Fed will manage to reduce inflation anywhere near the central bank's 2% annual target by the end of this year. Tilley, Wilmington Trust economist, said he expects year-over-year consumer inflation to still be 4.5% by the end of 2020. Before Russia's invasion of Ukraine, he had forecast a much lower 3% rate.

In Tuesday's government report, even excluding volatile food and energy prices, so-called core inflation for the past 12 months is expected to have hit 6.6%, according to the FactSet survey. That would be the biggest such year-over-year jump since August 1982.

Inflation, which had been largely under control for four decades, began to accelerate last spring as the U.S. and global economies rebounded with unexpected speed and strength from the brief but devastating coronavirus recession that began in the spring of 2020.

The recovery, fueled by huge infusions of government spending and super-low interest rates, caught businesses by surprise, forcing them to scramble to meet surging customer demand. Factories, ports and freight yards struggled to keep up, leading to chronic shipping delays and price spikes.

Critics also blame, in part, the Biden administration's $1.9 trillion March 2021 stimulus program, which included $1,400 relief checks for most households, for helping overheat an already sizzling economy.

Many Americans have been receiving pay increases, but the pace of inflation has more than wiped out those gains for most people. In February, after accounting for inflation, average hourly wages fell 2.5% from a year earlier. It was the 11th straight monthly drop in inflation-adjusted wages.