Blow-Out Top- On The Dollar Or The S/P?

Choppy, volatile, and very reactive to global market moves, is the easiest way that we can explain the forex markets at this time. The ability to move hard in such tight ranges reveals that one of two things are happening in forex trade right now; it is either major consolidation, or slow and quiet distribution.
The breaks away from the current price point areas on increasing volume and major headlines will be key to being in the next trending phase of trade, rather than watching it unfold. All we are looking for is a volume spike way over and above the norm on a daily close across most major traded markets. That will be the blow out top (or blow out bottom) signal that the consolidation/distribution phase is through, and that a trending forex period of trade is on its way.
Whether that will be long or short the dollar index seems to hinge on whether it will be on a day that the S/P breaks 1205 going long (a short-Usd break-out), or drops under 1165 going short (a long-Usd break-out). Whatever the number, increasing volume for the blow-out top/bottom will be pivotal to how things then unfold, and TheLFB Trade Team will be right here to signal it.

The art of trading forex, until the blow-out volume day happens, will be in having signals in place that sell resistance and buy support at the top and bottom of the 4 Hour channels, especially on the days of red-flag economic releases. The U.S. dominates the calendar this week, and along with Canada will provide the catalyst that tests speculative interest levels, that in turn will try to draw in institutional volume.
Whether that will be enough to create a break is yet to be seen, but history tells us we are getting the same market mechanics that have previously drawn in big moves.

The Art of Contrarian Trading: Volume, Consolidation, Distribution, and Headlines

Traders are at a stage in the market cycle that is one of the most frustrating to deal with, and where the most money gets squandered trying to work things out. This stage is when we go through a phase of consolidation, moving sideways consolidating the recent moves made, while anticipating a continuation of the previous trend.
Consolidation (maintaining the existing trend by fiercely protecting near-term price points) can extend itself so far, and for so long, that it actually turns naturally into distribution, (where the asset starts to get sold as the realization that the original trend has expired), when there is no more forward momentum. Add in low volume levels, as we have right now, and volatility starts to increase a little in-line with price action that looks slow and choppy.

Consolidation
Protecting the current price point; not wanting to go up or to go down. Consolidation phases usually happen on light volume.

Distribution
Liquidating the positions that are being held, but not wanting to reveal that it is being done whilst getting ready for a move in the opposite direction. Distribution phases usually have heavy, erratic volume spikes as the commodity or asset is liquidated, and bought back in smaller amounts by the party looking to distribute; they have to buy some back to stop the distribution turning into a sell-off before they are finished liquidating.

Volume
When used as a confirmation tool that the price point chosen is also being monitored by others, volume is invaluable. But as an exact count, as traders are accustomed to in equities, forex volume is like comparing apples to pears; both look good, both work, they both taste different, and both have a benefit in use. The volume that we see in the spot forex market reflects very well the actual, countable, volume that is seen in the futures currency trade. On a higher market participation (volume) day there is more chance of the current trend holding.
A sideways pattern of trade that is caused by the distribution, or selling of an asset before a reversal of the recent move occurs, looks to be happening on the major pairs. They have run out of forward momentum, and the consolidation phase could very easily turn into a distribution reversal; or a swing point.
For experienced market participants, the distribution phase is known to create the most market fear, or volatility; and that is what an experienced trader with a plan can feed off. There is no real way to confirm the move from consolidation to distribution until it is right upon us, and at that time the herd mentally tends to over-exaggerate the subsequent moves, and the buy/sell button has a tendency to get jammed down
Once the market players have distributed their holding of the previous trend, and have positioned themselves going the other way, it becomes time to inform the herd that things have changed, and to get their head up out of the trough, and to get a stampede going.
Getting into the distribution phase with a trade has to be well planned, have bigger targets, and a more flexible thought process. The herd still have their heads down as the distribution phase is happening, they are grazing on the previous trend, blissfully unaware that the change is happening on the four hour charts.
A screaming headline is always good for that, something along the lines of; "Euro strength in the face of Greek misery, Sell Dollars!!!" The news headline, designed to wake the herd up, tends to reverse the recent headlines that were there to hide their efforts to distribute their holdings. Yesterday, it was "More misery for the Euro as Euro-zone recession looms!!!".

Volume, Consolidation, Distribution, and Headlines; the pattern is there, it has been for decades, and still always seems to work. The Players are already in, they have worked the market mechanics, have linked the moves in the treasury, oil, gold and futures markets, have used previous trading experience to get to know how volume, consolidation and distribution work, and are waiting for just one thing; the herd to realize that they are going the wrong way.
Are you ready for the screaming headline? We have already seen the jawboning from central bankers and policy makers. All we need now is for the Players to have had their fill and to start to push the buttons that will get the herd moving.

Consolidation?
Absolutely, outside of one pair the 4 Hour charts go back to March 24th without solid price and trend action.

Distribution?
It would seem that the way global trade patterns have developed, that distribution has taken place; we have seen sporadic volume and some untimely moves, as well as exaggerated reactions to news headlines that just could not follow through.

Volume?
There is nothing strong about market participation levels recently, and that is the perfect foil to get a major job done. Without increasing speculative interest on the way up means that the drop lower will always be the elevator ride that follows the stair-steps.

Headlines?
Oh yes, more than enough of them to start to realize that somebody wants the herd to move.