The Week That Was – Analysing S&P 500 Using Volume Spread Analysis 25/11/2022

The previous week 17th November 2022, we were presented with a test bar. In volume spread analysis a test bar is to challenge the week holders to panic and sell. The price action then pretty quickly rebounds and closes towards to top of the range. The lack of selling gives the professionals confidence that they don’t need to absorb large amounts of supply. The next bar on Friday 18th November 2022 confirmed the test and the markets moved higher.

Volume Spread Analysis SOS 11 Test
Volume Spread Analysis SOS 11 Test

Monday the 21st November 2022, there was drop in price with the volume spread analysis principle, No Supply. The volume for this day was lower than the previous two days and shows there is a lack of selling pressure. The background tells us alot and we should study it very carefully.

The Background & Why it’s Important in Volume Spread Analysis

The background is very important to study because it can tell you wether there is strength or weakness. And looking at the S&P500 chart we can see where strength has entered the market. The bar with very high volume on the 17th June 2022 was based on negative news as there was a growing likelihood of a recession while global central banks tried to stamp out inflation.

After this news we witness a rally of 600 points and then price drops back down towards the area of very high volume. One thing that you have to be clear about is that areas of very high to ultra high volume are areas where price will highly likely retest. This occurs in October 2022 and price now has rebounded and once again price has rallied to just above 4000 points

Very high volume 17th June 2022

Are we starting to see weakness?

On Tuesday the 22nd November 2022 there is a confirmation of the No Supply principle and the S&P 500 continues to rally on Wednesday. There was no trading on Thursday due to thanks giving holidays. Friday the 25th November 2022 is a very interesting day. We have a small range bar with ultra low volume. Is this the start of weakness entering the market or is this a day where traders took advantage of an extra long weekend. I think it’s the latter. We’ll see how it plays out on Monday.

25th November 2022 Small Range Low Volume Bar

The weekly chart shows price action is still trading within the trend channel and I spoke about this in my YouTube channel.

S&P500 Weekly Chart

The S&P 500 has now crossed over the physcological level of 4000 points. So lets see if we are going to get any signs of strength. The volume spread analysis principle that I would look out for is tests or no supply, just like we had earlier this week.

Analysis of Dow Jones

Dow Jones Daily Chart Break Above Trend Channel
Dow Jones Daily Chart Volume Spread Analysis

The Dow Jones continues its rally after the break out of the trend channel. Also with the confirmation of the test after the breakout, the upmove has conitnued. The move is starting to wane but once again this could be due to the holidays.

Dow Jones Weekly Chart Volume SPread Analysis
Dow Jones Weekly Chart Testing Resistance

Looking at the weekly chart we have approached an area of resistance and at this level we have weakness so breaking through this level then its likely to retest the highs at around 37000.