Pervasive Euphoria Across The Market | Lines on a Chart by Tom

The markets closed another week at record highs, with the S&P 500 up by 2.3%, the Nasdaq by 3%, and the Dow by 2%. [...] I want to share two charts that caught my attention: The first chart, courtesy of Sentimentrader, depicts the small speculator index at the bottom. The annotation succinctly captures the essence of the chart— "small speculators are all in." 

 

 Small speculators are all-in.

This mirrors my observation last week regarding fund managers being fully invested based on the NAAIM index. The alignment between market participants, both large and small, underscores the pervasive euphoria across the market.

 Tech leadership vs S&P 500 is at highs exceeding the Great Financial Crisis.

The second chart, from Bank of America Global Research, highlights the Technology leadership versus the S&P 500, reaching levels surpassing those seen before the Great Financial Crisis. This serves as an intriguing backdrop to maintain awareness as sentiment and positioning continue to stretch.

Quoted from:

TomTheTrader1 @ Twitter/X
Lines on a Chart by Tom - (Mar 24, 2024) - The Market & The Moon. 

 

This week’s NAAIM Exposure Index number is 93.22. 

Active fund managers are all-in.

 

 [Euphoriameter]

 

 [CNN Fear & Greed Index ]

 

 

 [McClellan Oscillator]

 

500 Years of Western Dominance - What Comes Next | Glenn Diesen

Felix Abt: A great European religious war and the first pan-European conflict over superpower status came to an end in 1648. After 30 years of devastating wars and chaos, especially on German soil, with millions of deaths and shattered economies, the Peace of Westphalia brought a new, rules-based order to Europe, as the Western political class would call it today. This included the inviolability of borders and non-interference in the internal affairs of sovereign and equal states; it is regarded as a milestone in the development toward tolerance and secularization. How did this affect the new powers that emerged afterward and their quest for hegemony?

Glenn Diesen: The lesson from the Thirty Years War (1618-1648) was that no one power could restore order based on hegemony and universal values, as the other states in Europe would preserve their own sovereignty and distinctiveness by collectively balancing the most powerful state. This was evident when Catholic France supported Protestant Sweden to prevent the dominance of the Catholic Habsburgs. The Peace of Westphalia in 1648 gave birth to the modern world order, in which peace and order depend on a balance of power between sovereign states. The Westphalian system prevents hegemony as other states collectively balance the effort of an aspiring hegemon to establish economic and military dominance, and universal values are rejected to the extent they are used to reduce the sovereignty of other states.

» The Westphalian system prevents hegemony. « 

The 1648 peace treaty between the parties in the Thirty Years' War established the Westphalian system.

 

The principle, known as the Westphalian principle of sovereignty, prohibits interference in the internal affairs of another state, and every state is equal before international law, regardless of its size. Thus, every state has sovereignty over its territory and its internal affairs, to the exclusion of all external powers. But when the European colonial powers used violence to impose their will on other continents, they violated this ideal. Was this the beginning of this principle’s demise?

 

The Westphalian system should in principle be based on sovereign equality for all states. However, it originated as a European security order that later laid the foundation for a world order. Under the original Westphalian system, the Europeans claimed special privileges and the principle of equal sovereignty for states did not apply to everyone. Sovereignty was deemed to be a right and a responsibility assigned to “civilized peoples”, a reference to the Europeans as white Christians. The international system was divided between the civilized and the barbarians. There was one set of rules for the Europeans in the civilized “garden”, and another set of rules when the Europeans engaged with the so-called despotic barbarians in the “jungle”. The interference in the internal affairs of other peoples and the development of vast empires was framed as the right and the responsibility of civilized states to guide the barbaric peoples towards universal values of civilization. This responsibility to govern other peoples was termed the “white man’s burden” and the “civilizing mission”.

 » The gardeners have to go to the jungle. «

Josep Borrell's universal mission.

In our current era, we have abandoned the civilized-barbarian divide, but we have replaced it with a liberal democracy-authoritarian divide to legitimize sovereign inequality. The West can interfere in the domestic affairs of other states to promote democracy, invade countries to defend human rights, or even change the borders of countries in support of self-determination. This is the exclusive right and a responsibility of the West as the champions of the universal values of liberal democracy. As the EU foreign policy chief Josep Borrell explained: “The gardeners have to go to the jungle. Europeans have to be much more engaged with the rest of the world. Otherwise, the rest of the world will invade us”.

International law in accordance with the UN Charter defends the principle of sovereign equality for all states. The so-called “rules-based international order” is based on sovereign inequality, which introduces special privileges under the guise of universal liberal democratic values. For example, the West’s recognition of independence for Kosovo was a breach of international law as it violated the territorial integrity of Serbia, although it was legitimized by the liberal principle of respecting the self-determination of Kosovo Albanians. In Crimea the West decided that self-determination should not be the leading principle, but territorial integrity. The US refers to liberal democratic values to exercise its exclusive right to invade and occupy countries such as Iraq, Syria and Libya, although this right is not extended to countries in the jungle.  

» The so-called “rules-based international order” is based on sovereign inequality, 

which introduces special privileges under the guise of universal liberal democratic values. «

In 1945 fifty countries established the United Nations System. With the help of this supra-national governance

system the Anglo-Frankish-Zionist-Dönmeh-Wahhabi-Takfiri elites of the UK, France, Turkey, Saudi Arabia, the US and

some others, expected to secure their hegemonies beyond the foreseeable demise of traditional colonialism. 

The Bretton Woods conference, World Bank, IMF, nuclear bombing of Japan, dividing Korea 

and creating the State of Israel in Palestine are early show cases of what Pax Americana and UN are all about.

[...] The Ukrainian conflict is essentially an extension of American geopolitics, which aims to carry out Mackinder’s aforementioned stanza, “He who rules Eastern Europe rules the world.” What are your thoughts about it?

Preventing Germany and Russia from controlling Eastern Europe means that much of the Eurasian continent becomes landlocked. US control over Eastern Europe implies that Russia can not bridge Europe and Asia, but rather becomes an isolated land-locked region at the dual periphery of Europe and Asia.

Brzezinski outlined the strategy for developing and preserving US global primacy, which relies on the age-old wisdom of divide-and-rule. Brzezinski wrote that the US must “prevent collusion and maintain security dependence among the vassals, to keep tributaries pliant and protected, and keep the barbarians from coming together”. Historically, the British and the Americans have worked to prevent Germany and Russia from coming together as it would form an independent pole of power. Hegemony requires conflict between Germany and Russia, as Germany becomes a dependent ally and Russia is weakened. This logic is also applied to why it is beneficial to perpetuate tensions between the Arabs and Iran, or between China and its neighbors. The US has been very concerned about the economic integration between the Germans and Russians, which is why the US was so hostile to the Nord Stream pipelines and most likely was behind the attack on these pipelines. 

 

 Anka Feldhusen, a fine example of a German Neonazi apparatchik of the 21st century.

March 22, 2023.

 

 Wehrmacht 2.0 south of Kiev. 

There will be hell to pay.

March 22, 2024.

The problem is that the world is no longer Western-centric and by pushing Russia away from Germany, the US has pushed Russia towards China – a technological and industrial power much greater than Germany. In the mid-19th century, the British fought against Russia in the Crimean War with the explicit purpose of pushing Russia back into Asia, where it would remain technologically and economically backward and stagnant. NATO’s war in Ukraine is a repeat of the efforts to push Russia back into Asia, although this time Asia is much more dynamic than the West. The failure of the West to adjust our grand strategy to this new reality has been a mistake of immeasurable proportions. We have not subordinated Russia, rather we ended Russia’s 300-year-long Western-centric policies in which Moscow looked to the West for modernization.

What is driving this stunning anti-Chinese obsession in the United States against a country that upholds the principle of non-interference in other countries, that used its mighty navy only for trade and not for gunboat politics when it was a superpower in the past, and that follows the millennia-old concept of “Tianxia” (天下), which literally means “everything under heaven”, that is, an inclusive world full of harmony for all?

China does not threaten the US, but it threatens US dominance as the foundation for the unipolar world order established after the Cold War. The US is currently attempting to weaken China through economic warfare, convincing its allies to decouple from the Chinese economy, and knocking out Russia in Ukraine as a vital partner of China. If the US fails to achieve its objectives, then it will likely stoke conflicts between China and its neighbors to make the neighbors more dependent and obedient, and also create instability for the Chinese that will bleed it of resources. The ideal would be greater tensions between India and China, as India would have to make itself more reliant on the US and it would be an important ally to weaken China. If all fails, then the US could also fight an indirect war through a proxy similar to the way they are using Ukrainians to fight Russia – by for example pushing for Taiwan’s secession. Besides securing its supply chains and building a military for deterrence, China should prioritize resolving its disputes with India as any friction with China can be exploited.

» This is a Westphalian system with Eurasian characteristics. « 

Since 2009 BRICS is establishing a Multipolar World Order based on Westphalian principles and controlled by the 

Eurasian great powers China, India and Russia. Egypt, Ethiopia, Iran and the United Arab Emirates joined BRICS

on January 1, 2024. To date 15 more countries have formally applied to join.

Finally, in your new book you say that a new Westphalian world order is reasserting itself, albeit with Eurasian characteristics. Can you explain this in more detail?

We are returning to a Westphalian system based on a balance of power between sovereign states. However, the former Westphalian system was based on sovereign equality among the Western powers while the “barbarians” or “despots” outside the West were not deemed to be qualified for the responsibility of sovereignty. It was a dual system of collective hegemony of the West, with sovereign equality between the Western states. In the new Westphalian system, there are several powerful states that are not Western, with China as the leading economy in the world. The Eurasian powers such as China, Russia, India and others are developing the economic foundations for this system with new technologies, transportation corridors and financial instruments. The Eurasian powers are more prepared to include the Global South as sovereign equals. The Eurasian powers reject the so-called “rules-based international order” based on sovereign inequality, as Western dominance should not be legitimized by a civilized-barbarian or liberal democracy-authoritarian divide.

The Western powers over the past centuries have had an inclination for dominance and empire by controlling limited maritime corridors. Russia’s Eurasianism in the 19th century was a hegemonic strategy by dominating the Eurasian landmass through land corridors, although under the multipolar distribution of power the Russians do not have the capability or intentions to pursue hegemony. Instead, Eurasian integration entails moving from the dual periphery of Europe and Asia, to the center of a new Eurasian construct. Even China as the leading power does not have the capability or intention to pursue hegemony. Countries like Russia are content with China being the leading power, although they would not support China if it demanded dominance and hegemony. The Chinese demonstrate that they are not attempting to limit Russia’s economic connectivity with other states to make itself the only center of power. In the Global Civilization Initiative, the Chinese are also advocating for respecting civilizational differences and that all states have their own path to modernity, which implies that China is not claiming to represent universal values that legitimizes interference into the domestic affairs of other states. The West assumed that the Russia-China partnership was a “marriage of convenience” and that they would clash over influence in Central Asia, but this never happened because neither side demanded hegemony. Instead of sabotaging each other’s relations with the region, China and Russia harmonized their interests in Central Asia. China, Russia, India and other Eurasian powers have different visions and interests in terms of Eurasian integration, but they all need each other to realize their goals and pursue prosperity. Hegemony is not an option. This is a Westphalian system with Eurasian characteristics.

Quoted from:

500 Years of Western Dominance: Is it Coming to an End and What Comes Next?

Felix Abt talks with Glenn Diesen. In: Eastern Angle - March 22, 2024.

 

See also:

Glenn Diesen (2024) - The Ukraine War & the Eurasian World Order. 

Zbigniew Brzezinski (1997) - The Grand Chessboard: American Primacy and Its Geostrategic Imperatives.

Carl Schmitt (1950) - The Nomos of the Earth in the International Law of the Jus Publicum Europaeum.

The 500 Year Cycle | Raymond H. Wheeler

The 1000 year cycle tends to break down into halves of about 500 years each. Centering on the dates of 375 BC, 30 AD, 460 AD, 955 AD, and 1475 AD, climate was dry and colder than usual. The warm periods were short and were often disrupted by drops in temperature. Midway between these dates, the warm periods stretched out; the interruptions were not as long, and the cold periods shortened. The result is an intermediate cycle averaging 510 years in length.

 

 

 » Mass migrations were extensive, and all the ancient civilizations collapsed. «

Vandals sacking Rome, 455 AD.

The beginning of the first of these 500-year rhythms marks an important place in the history of climate. Prior to 575 BC, climatic cycles were longer and more extreme than they have been since then. In the two centuries immediately following, from 450 ta 320 BC, it was warm much of the time. Two 100-year cycles were almost fused into one. The cold period between them, at 420 BC, was very short. After that, the cold periods lengthened. By the end of this 500-year period, at the time of Christ, there was an exceptionally long cold period.

The cold phase centering on 460 AD, at the end of the next 500-year cycle, was also exceptionally cold. Mass migrations were extensive, and all the ancient civilizations collapsed. There was a long-term downward trend in rainfall. Although there were long cold phases in the 600s and 700s, they were frequently interrupted by silts to the warm side and did not seem to be exceptionally bad. The cold phases of the 800s and 900s were extremely severe, causing many migrations, primarily from the northern countries — especially when conditions began to deteriorate approaching 955, near the end of the 500-year rhythm.

 

 » Civilizations broke up and new ones took their places. «

 Migrants storming European Union borders, 2024 AD.

Subsequently, temperatures warmed suddenly. The 1000s were so warm that trees grew in Greenland. This was the period when Vikings crossed the Atlantic, One of the most severe hot droughts in history occurred in the 1130s. The 13th century saw a long warm period. Then climate began to deteriorate again. While the 14th century was warm much of the time, there were frequent and sharp drops in temperature; often it was very stormy. During several winters, the straits between Denmark and Sweden froze over solid enough to support horses and sleds, Greenland began to freeze. In the 15th century, there was no long warm period.

The next 500-year rhythm terminated at 1475. Subsequently, temperatures warmed up again. The 17th century was so warm that the next 100-year cycle had but a short cold phase, centering on 1655, and this was quickly interrupted by a shift back to the warm side. During the 19th and 20th centuries, climate deteriorated again.

 

» The 500 year period beginning at 1475 is drawing to a close. «

 Migrants breaching US southern border, 2024 AD.

Climate change? Sure.

Events of great importance occur every 500 years. Midway between 575 BC and 460 AD, the Roman Empire began its decline as Christianity rose. There were no strong European civilizations for a long time. On the other hand, there were very strong Asiatic empires such as that of the Huns. Midway between 460 and 1475, in the 9th and 10th centuries, a vast change occurred, again involving mass migrations, These events divided the Middle Ages into two halves. In the first half, there were brilliant empires like those of Justinian with its capital at Constantinople, Charlemagne in the West, and the Arabs in the East. The Arabs moved into Spain and India, developing brilliant civilizations at Cordoba and Bagdad. But all this came to an end. These civilizations broke up and new ones took their places. Following 975, the feudal period developed, with the growth of principalities that were to form modern European states. Amazing empires were built by the Mongols in Asia, the Incas in South America, and the Mayas in Central America. In India and Japan, new empires were born. The Balkans achieved their Golden Ages during this period.

All this came to an end in the 15th century. The Medieval economy, customs, and modes of thought disappeared. With the new 500-year climatic cycle came the Renaissance, the Reformation, and the building of modern nations — first under absolute monarchs, then under constitutional governments. This most recent 500-year cycle has witnessed the awakening of modern art, science, and economics. In these more advanced civilizations, the common people have, for the first time in history, come into their own under democratic political and economic systems.

 » The same types of events occurr with almost clock-like regularity. «

The 500 year period beginning at 1475 is drawing to a close. We are now witnessing many of the same types of events that have occurred under similar circumstances with almost clock-like regularity five times before in history. These events are of the utmost significance for the businessman and student of today — and tomorrow.

 

Quoted from:

Raymond H. Wheeler (1943) - The 500 Year Cycle. 

In: Michael G. Zahorchak (Ed. 1983) - Climate, the Key to Understanding Business Cycles: 

With a Forecast of Trends Into the 21st Century.

 

  » A 500-year cycle is now terminating, which belonged to Europe.
The next 500-year cycle will belong to Asia. «
Raymond H. Wheeler, 1951.

See also:
Raymond H. Wheeler (1943) - The 100 Year Cycle - Climate, Regime Change and War.
Donald A. Bradley (1943) - Cycles Write World History.

Peter Temple (2017) - The Wheel of Time. Raymond H. Wheeler's Drought Clock.

Sunspots, Lunar Cycles and Weather Cycles | Louis M. Thompson

The occurrence of an 18- to 20-year cycle in weather in the U.S. Midwest is no longer controversial. The controversial issue is the cause. This article will present both sides of the issue, and will indicate why we will know more about the cause after the 1990s.

[...] The sunspot cycle has been associated with the “20-year drought cycle” in the western U.S. since about 1909, when A.E. Douglass started publishing his tree-ring studies. This scientist became so well known that he was able to establish the Laboratory for Tree Ring Research in Tuscon, Arizona, in 1938. 

 

[...] The sunspot cycle has averaged about 11 years since 1800. As the sun rotates on its axis, it makes a complete turn in about 27 days. Large and persistent spots appear to move from left to right for about two weeks, disappear, and return after about two weeks. The leading edges of spots or clusters of spots have a negative charge in one 11-year cycle and a positive charge in the next cycle. Hence, the term “double sunspot cycle.”

The conventional wisdom is that the drought cycle of about 20 years occurs near the end of the negative cycle and at the time of low solar activity. The drought periods of the 1910s, 1930s, 1950s, and 1970s occurred at the end of the negative cycle. The drought periods did not consistently follow that pattern from 1800 to 1900, although the severe droughts of the 1820s and 1840s occurred at the end of the negative cycle.

Quoted from:
Louis M. Thompson (1989) - Sunspots and Lunar Cycles: Their Possible Relation to Weather Cycles.
In: Cycles, September/October 1989, Foundation for the Study of Cycles.
 
See also:
William Stanley Jevons (1875) - Sunspots and the Price of Corn and Wheat.

Raymond H. Wheeler (1943) - The 100 Year Cycle - Climate, Regime Change and War.

 Donald A. Bradley (1950) - Cycles Write World History.

Michael G. Zahorchak (1983) - Climate, the Key to Understanding Business Cycles: With a Forecast of Trends Into the 21st Century.
Jasper Kirkby (1998) - Sunspot Cycle Length vs Temperature Anomaly.
Henrik Svensmark (2007) - The Cloud Mystery.
Tom McClellan (2012) - Sunspots - The Real Cause of Higher Grain Prices.
TPR (2016) - Inigo Owen Jones. The Weather Prophet.
Valentina V. Zharkova et al. (2017) - The Heartbeat of the Sun.

 Peter Temple (2017) - The Wheel of Time: Raymond H. Wheeler's Drought Clock.

Peter Temple (2019) - An Introduction to Climate Cycles.

The 18.6 Year Cycle in the General Economy | Louis M. Thompson

I believe there are weather cycles that trigger events in our economy, and I believe there is one weather cycle that is related to the 18.6 year lunar cycle. For that reason, I have prepared a lunar declination chart patterned after Fig. 1 and shown as Fig. 3. If a relationship between the lunar cycle and the weather cycle can be explained, we will gain a real milestone in explaining the business cycle.

 

 

 

[...] We have a 9.3-year cycle in production, which gives rise to a 9.3-year cycle in grain prices. Highest yields have occurred at the time of minimum declination and the four following years. Lowest prices have occurred because of a build-up of supplies, and the low prices have occurred about every 9.3 years and every 18.6 years. Fig. 3 describes the cycle in agriculture better than it does the general economy. Yet, as we look back to the nineteenth century, there were depressions at the time of maximum declination (285°) in every 18.6-year cycle. In this century, our lowest agricultural prices occurred in 1913, 1932, 1950, 1969, and 1987, or every 18.6 years. lt appears that a weather cycle of 18.6 years drives a production cycle of the same length, which drives a price cycle of the same length.

Quoted from:
Louis M. Thompson (1989) - The 18.6-Year Cycle in the General Economy.
In: Cycles, May/June 1989, Foundation for the Study of Cycles.

 

See also:

Edward R. Dewey & Edwin F. Dakin (1947) - The 18.6 Year Real Estate Cycle. 

In: Cycles: The Science of Prediction.

TPR (2022) - Periods When to Make Money. Benner Cycle Projection into 2023 Major Low.

Predictable Cycles in Geomagnetic Activity | Theodor Landscheidt

Geomagnetic storms, which are released by energetic solar eruptions, are important geophysical events. Newer results indicate that there is a connection with weather. Figure 1 shows the zonal type of atmospheric circulation as a result of geomagnetic disturbances caused by the sun’s eruptional activity, and meridional circulation related to a lull in geomagnetic activity. This is a permanent feature that regulates the prevalence of warm westerly flow or cool arctic air over Europe and North America. 

 

 

 

 

The bulk flow speed of the solar wind, which is indicative of the energy of eruptional mass ejections and resultant shock waves caused by solar eruptions, is strongly coupled to geomagnetic activity, which in turn seems to be the common factor of a wide variety of terrestrial phenomena.

Quoted from:
Theodor Landscheidt (1989) - Predictable Cycles in Geomagnetic Activity and Ozone Levels.
In: Cycles, November/December 1989, Foundation for the Study of Cycles.

Election Years Are Different | Tom McClellan

I have been writing about the Presidential Cycle Pattern since 1994, using the pattern which is derived from averaging together SP500 price data in 4-year chunks of time. One difference in how I do this versus others is that I start each 4-year period as of November 1 instead of January 1, to better align with election day. This week's chart looks at the differences (and similarities) in the versions of the Presidential Cycle Pattern depending on what type of president is in office. The green line reflects first term presidents from a different party than the last president, and reflects the condition we have now.

  » March is typically a sideways month, part of a larger sideways pattern 

lasting all the way until late May. The market normally rallies from June to election day. «

[...] A lot of the time, the two patterns behave very similarly. But in March of the election year, there is a notable difference. When a first term president is in office and running for reelection, March is typically a sideways month, part of a larger sideways pattern lasting all the way until late May. March is different, though, when a second term president is in office (red line). [...] The stock market normally rallies from June all the way to election day [November 5] when there is an incumbent running for reelection. And usually an incumbent will win reelection. That is how things normally go.

 

Larry Williams identified June 2024 in the current decennial pattern
 as  » the sweet spot with 90% accuracy « to buy and hold until December 2025. 

[...] This year we have a challenger who is not an unknown quantity (to Wall Street), who at the moment has a slight lead in the polls. This type of condition is totally backwards from how election years usually go.  Add to that the additional unknowns about how President Trump is facing multiple trials for alleged crimes, and we have an election year completely unlike any previous one.  So trying to run a forecast model based on how things have gone in prior election years may just not work this year.
 

Reference:
Tom McClellan (Mar 14, 2024) - Election Years Are Different.

ICT Draw on Liquidity | Darya Filipenka

Liquidity is the lifeblood of the markets. Liquidity is what allows anyone to buy or sell for a profit or a loss. It is what creates opportunity in the markets. While liquidity may not hold much significance for a retail trader, it is of paramount importance to big players who must carefully consider it in order to execute positions successfully. In an non-liquid market there are few buyers and sellers, and trades may take longer to complete, and prices can be more volatile. To help you better understand what liquidity is, I have drawn some simple diagram. It illustrates why we refer to certain levels as 'liquidity'. The point is not that the models themselves are liquidity, but that when a certain price model appears, liquidity is attracted at key levels and price points.

So what is the use of liquidity for us traders? Good question. Liquidity helps us determine where the price is likely to go next. You can learn to trade only using liquidity levels, it's not difficult, but the risks and potential profits will not be so attractive. In order to get a high-quality trading idea, using the liquidity, you need to apply the market structure on the Higher Time Frames, order blocks, and Premium/Discount zones. This helps to understand what kind of liquidity will attract the price and where we should enter into the trade and where we should exit.

How to identify the Draw on Liquidity (DOL): As a day trader, the DOL can be PWH/PWL (Previous Week High/Low), PDH/L (Previous Day High/Low), or session High/Low from Asia, London, or New York paired with EQH/EQL (Equal Highs/Lows) with a Low Resistance Liquidity Run (LRLR) condition. EQH/EQL (Equal Highs/Lows) are large pools of liquidity so institutions will always draw towards those levels to take out retail.

How do I find the next Draw on Liquidity? First thing, price is always either re-balancing or taking liquidity. Price is going from Premium/Discount array to P/D array. Hence, you must annotate your P/D zones to know If price re-balanced or will re-balance, you must also annotate your liquidity and P/D arrays. To find the next draw on liquidity, you can follow a displacement, use the reaction on a P/D array.

External range liquidity refers to the buy side liquidity above the range high and sell side liquidity below the range low in the current trading range. It Is associated with liquidity runs that seek to pair orders with pending order liquidity, which is in the form of a liquidity pool. External range liquidity runs can be low resistance or high resistance in nature. As a trader, you want your trades to be In low resistance conditions, meaning you don't want any resistance in your path of profitability. While Internal Range Liquidity is the liquidity inside the defined range (External Range Liquidity), This could be In form of any institutional reference that we can use as entry such as order blocks, fair value gaps, volume imbalance, and more.

 

Reference:

Darya Filipenka @ Twitter/X.

Darya Filipenka (2023) - Unlocking Success in ICT 2022 Mentorship: The Smart Money Guide to the Full ICT Day Trading Model. 

Michael J. Huddleston (2021) - ICT Liquidity - The Financial Market's Zero Sum Game.

Michael J. Huddleston (2016) - Private Mentorship Core Content - Month 01. (videos)

TTrades (2023) - Draw on Liquidity - ICT Concepts.

ICT Liquidity Runs | Michael J. Huddleston

As price action traders, we're looking specifically for reference points where there is a high probability of liquidity resting in the marketplace. Related to ICT concepts, liquidity relates to buy orders and sell orders. It's as simple as that.

Below old lows, the market will seek liquidity for the sell side or the sell stops, taking orders out. Understanding this premise, when we view price action, it removes all of the retail-minded perspective but heavily leaning on indicator-based ideas. When we adopt these principles with study of price, it gives us the  truest and purest view of how price is delivered.

We have no confidence or direct relationship to our directional bias on price relative to anything except for price itself. If the market is moving from an old high, we know that there is going to be liquidity resting above that old high. If the market is moving from an old low, we know there is going to be a rest liquidity below those lows. It is just that simple. 

 

LRLR = Low Resistance Liquidity Run
HRLR = High Resistance Liquidity Run

As a trader you want to be trading when there is LRLR conditions because during LRLR conditions price will cleanly deliver to your target a lot quicker than HRLR conditions. If you're in a trade a lot longer than expected it is most likely because you are in HRLR conditions.

A LRLR will have clean highs or lows and for this example it means there's a large pool of liquidity resting above the Clean Highs/EQHs. This is where retail traders are placing their stops and smart money will look to take out these stops.

Another way you can look at LRLR is if there are EQH/Ls & multiple highs/lows lined up in a row (Trendline Liquidity). This is what #TheStrat traders call Pivot Machine Gun (PMG). It's called PMG because the algorithm spools higher like a machine gun triggering stop losses to get taken out.

 

So in this example, after SSL got raided, you're looking to go long inside of the FVG within the BPR to target the EQH. This is LRLR conditions.

 

When you have EQH/L, any PD arrays in-between where price is currently at to the EQH/L will have a low probability of holding. Smart money will target the largest liquidity pool which will be the EQH/EQL so price will either go through the PD array, or consolidate at the PD array then continue in the direction of the EQH/L. Now we will look at an example of HRLR. Typically with HRLR conditions there will be a stop hunt (fu) on buyside or sellside liquidity. Once there's a stop hunt it will leave a Point of Interest (POI) / PD array which is typically an orderblock or fair value gap.

 

Because there's a stop hunt (fu) which leaves a POI, the POI will act as resistance which will make it a HRLR condition. So in this example, instead of going long at the lows to target the high formed from (fu), I'd rather wait for price to reject off the POI to look for shorts.

 

1st pic below is M15 timeframe, 2nd pic below is H1 timeframe. You will see a M15 fu raid on BSL which leaves an H1 bearish orderblock making it HRLR. After the fu raid price went lower and when it retraced back up it rejected the orderblock then started to take out internal SSL.

 

 

 

HRLR conditions can also happen when indices ( $ES $NQ $YM ) is not in sync with each other or when it's not in moving inversely to $DXY (dollar). $GU & $EU are supposed to move inversely w/ $DXY as well so if they're moving together it is HRLR conditions.

Reference:

Michael J. Huddleston (2021) - ICT Liquidity - The Financial Market's Zero Sum Game.
Michael J. Huddleston (2016) - ICT Mentorship Core Content - Month 1 - Liquidity Runs. (video)

Dangstrat (Apr 10, 2023) - Thread on LRLR vs HRLR. 

 

TTrades (2023) - Low Resistance Liquidity Run - ICT Concepts.