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On Monday, January 24, 2022, CME Group equity index products hit a new single-day record high for volume. The combined volume for all futures and options products totaled 15,846,802 contracts, slightly beating out the previous high of 15,623,428 contracts set on February 28, 2020, by a mere 223,374 contracts.
With the increase in volume happening in tandem with a spike in volatility, and also thinking back to the beginning of 2020 when a similar pattern occurred, we figured this would be a good time to point out what we feel could become significant areas of importance if the equity index futures markets continue to trade lower.
You’ve heard the coaches say that the markets take the stairs on the way up and the elevator on the way down. Well, if you’ve been paying attention to the volatility in equity index futures recently, it would appear there’s some real validity to the claim.
On a day when the Nasdaq-100 futures (NQ) market was looking down the barrel of its second-largest single-day break in history, in terms of points, before rallying to close the day higher, this trader played it just right. Funded trader Ki Chang Kim held it together as the swings got wider and wider to take home a healthy $3,200 profit for the day trading the NQ.
Big moves bring a lot of opportunities, so keep some powder dry for tomorrow because these markets could be moving for a while!
Volume patterns and Open Interest can tell you a lot about the strength of a move. For example, when volume and open interest increase as a price moves lower, it could signify that traders are confident the market will continue to break, and they are willing to open new short positions.
You should also be on the lookout for potential chart patterns. After all, if something stands out to you on a chart, then there’s a pretty good chance a lot of other traders are seeing exactly the same thing, so those areas can become psychological levels of importance. So it’s good to be aware of these things, so you’re not caught off guard when putting on a trade.
In the video above, the Topstep coaches expand on both points and share a few more useful techniques to help you prepare for what’s waiting below in the equity markets.
Trade Well!
