Our latest webinar recording where we consider the signals currently being sent by the bond market and in particular the HYG – the EFT for high yielding bonds, often labeled junk bonds. We also cover two different outcomes of high volume on Romeo Power and Lucid along with a great example of the volatility indicator in play with a two-bar reversal on the daily chart for General Motors.
How the Bond Market Reveals Market Sentiment – Plus Using the Volatility Indicator with Candle Patterns
The bond market is a powerful barometer for global sentiment. Bond prices and yields move inversely to risk appetite. Traders watch them closely. They signal risk-on or risk-off early. Volume price analysis (VPA) confirms reactions. The Quantum volatility indicator adds timing with candle patterns.
Bond Yields and Risk Sentiment
Bond yields rise when prices fall. This happens in risk-on environments. Investors sell safe bonds. They chase equities or growth assets. Yields fall (prices rise) in risk-off. Fear drives buying of government bonds—safe havens.
Examples:
- Yield spikes = optimism (stocks rally, commodity currencies strong).
- Yield drops = caution (safe-havens like JPY/CHF gain).
VPA spots conviction—high volume bond selling (yields up) validates risk-on.
Candle Patterns and Volatility Indicator
Candle patterns on bond charts (e.g., US 10-year Treasury futures /ZN) reveal shifts. Combine with Quantum volatility indicator for clarity:
- High Volatility Spikes: Indicator surges. Wide candles appear. High volume rejection = potential reversal.
- Doji or Pin Bar at Extremes: Indecision on volatility peak—reversal likely.
- Engulfing Patterns: Bullish/bearish engulfing on high volume + volatility spike = strong sentiment shift.
Quantum volatility indicator on NinjaTrader flags expansion. This warns of momentum or traps.
Practical Trading Insights
Bond moves lead equities and forex. Yield break higher on high volume = risk-on confirmation. Long stocks or commodity currencies. Falling yields on volume = risk-off—favor safe-havens.
VPA confirms candle patterns—high volume validates. Low volume extremes = traps.
Anna Coulling’s VPA approach with Quantum tools turns bond sentiment into disciplined trades. Volatility indicator with candles spots shifts early.
The bond market reveals sentiment clearly. Yields drive risk appetite. Quantum volatility indicator with candle patterns delivers timing edge.
How the VIX Is Calculated
The VIX uses implied volatility from S&P 500 (SPX) options prices. It aggregates a wide range of out-of-the-money puts and calls. This creates a forward-looking estimate. No historical data—just current market pricing of protection.
- High VIX (>30): Extreme fear—often during crashes or crises.
- Moderate (20-30): Elevated uncertainty.
- Low (<20): Complacency—bullish but potential top.
VIX is cash-settled. Futures and options on VIX allow direct trading.
Why the VIX Matters for Traders
VIX reveals sentiment:
- Risk-Off Spikes: Equities drop, safe-havens (gold, JPY) rise. VIX surges on high volume.
- Risk-On Calm: Equities rally, VIX falls. Low volume extremes warn of reversals.
VPA on VIX charts spots conviction—high volume spikes validate fear. Low volume highs = fading panic.
Quantum volatility indicator on NinjaTrader tracks VIX alongside markets. Trend Monitor aligns sentiment direction.
Practical Trading Insights
Watch VIX for context:
- VIX spike + high volume = risk-off confirmation. Favor defensives.
- VIX low + divergence = complacency—potential equity top.
Anna Coulling’s VPA approach with Quantum tools turns VIX into disciplined signals.
The VIX measures expected volatility clearly. It’s a key sentiment indicator. Quantum with VPA delivers reliable reads.
Bond Yields: What They Reveal About Market Sentiment
Bond yields are a powerful indicator for traders. They move inversely to bond prices. Rising yields signal falling prices. Falling yields mean rising prices. This relationship reveals global risk sentiment, growth expectations, and inflation outlook. Volume price analysis (VPA) confirms the conviction behind these moves.
The Inverse Relationship: Prices and Yields
When bond prices rise, yields fall—and vice versa. Investors buy bonds in uncertainty (prices up, yields down). They sell in optimism (prices down, yields up). US 10-year Treasury yields are the benchmark. Spikes warn of change.
VPA spots intent—high volume yield rises show strong selling (risk-on). Low volume extremes signal potential reversals.
What Rising Yields Reveal
Higher yields indicate:
- Risk-On Optimism: Growth expectations. Investors chase equities. Commodity currencies (AUD, CAD) strengthen.
- Inflation Pressure: Central banks may hike rates.
- USD Strength: Higher US yields attract capital.
Example: Yield break higher on high volume—bullish stocks, bearish bonds.
What Falling Yields Reveal
Lower yields signal:
- Risk-Off Fear: Uncertainty drives safe-haven buying. Equities drop. Gold, JPY, CHF gain.
- Growth Concerns: Expectations of rate cuts or slowdown.
- Flight to Safety: Bonds as protection.
VPA confirms—high volume yield drops show conviction buying in bonds.
Trading Insights with VPA and Quantum Tools
Bond yields lead sentiment shifts. Watch 10-year Treasuries (/ZN futures). High volume yield moves validate direction. Quantum volatility indicator flags surges. Trend Monitor aligns bias.
Anna Coulling’s VPA approach with Quantum tools turns yield signals into disciplined trades. Relational indicators rank USD on yield changes.
Bond yields reveal market psychology clearly. Rising = optimism. Falling = caution. VPA with Quantum delivers the edge.
By Anna Coulling