The bulls managed to squeeze in a bit of accumulation on Friday, making this only the second time in February with convincing across the board volume commitment (yes, +2 on HG may not be much, but it still counts all the same). With leap day upon us there is still one more chance to up that number to 3, but so far glancing at the futures, it seems that moment may have to be put on hold.
During the low volume rally this past week (which still has many folks unconvinced of its reality), our Heat Gauge gave us a scorching buy signal, and on Wednesday we bought SPY Apr16 190 calls at the open. Putting some of our new buy rules in place, we waited until after the morning flush to secure an entry very close to the low of the day around 189.70. By Thursday afternoon, SPY had risen almost 6 points and another one of our new buy/sell rules came into play and got us out of the trade… selling into strength at the close for a gain on our calls of 58%.
As far as TVO goes, the oscillator is hovering around zero, which still reflects lack of a clear intention from the bulls. Meanwhile many seasoned veterans on Wall Street are chanting long live the V, while others are pointing to yet another leg down. Considering that TVO has called every single bottom (in a correction over 10%) over the last 15 years, and has yet to call this one, well, the latter scenario is one to be on careful watch for. The best bet for the bears to make that come to fruition is to pump up the volume, because more time spent in this range will likely lead to more consolidation. The low volume strategy may have been taken the bulls this far, but there’s only so long they can continue to run out the clock. -MD
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