The short holiday week ended up with major gains, but with not much major volume. By Friday, many folks were unconvinced that the bulls can really stake their claim on this rally. Tuesday and Wednesday were bona fide accumulation days, though, sending our Heat Gauge into frozen territory. A lower volume reaction to the week’s sudden rise is exactly what the bulls are looking for, and unless the bears prove otherwise, the stage is still set for an orderly pullback or at least some consolidation below SPY’s 50 dma.
Interestingly, the boost in advancing volume on the Nasdaq Friday was cancelled out almost equally by the rise in declining volume on the big board, leaving HG effectively at zero on sinking volume overall. Divergences are typically bearish, but until things chill up again, going short will be put on hold for the time being. The drop in volume also has TVO below zero, and we’ll be watching carefully this week for a reversal which will potentially put us back into a long-term buy mode. Another thing to keep an eye is that we’re soon getting ready to unveil a brand new oscillator, so stay tuned! -MD
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