TVO Market Barometer 11-21: Has the market cried wolf one time too many?

The magic number that folks have been clamoring about for weeks finally happened. Now that SPY has traded above 260, you can’t help but think that this is all a self-fulfilling prophecy brought to fruition by algos and super computers (with a close at 259.99 just for our meager human amusement). Well, that may be true (no other explanation makes quite as much sense), but where does the market go from here? Will SPY 300 become the new 260, or has the market just cried wolf one time too many and is not fooling anyone any longer?

What matters is where the big institutions are headed and from looking at volume right now, their approach is somewhat mixed. The Nasdaq was clearly on board for an accumulation day on Tuesday, but the folks trading SPY seem to have gotten a head start on holiday travel plans. And then there are those that say volume has been low all year, so what difference does it make now?

TVO, our Total Volume Oscillator, is tuned into the fluctuations of volume as it relates over a time. The big question is not just how much volume there is, but rather how much volume there is compared to what.

When the oscillator drops below zero (which is where it is right now), it means that the buying sentiment of the big boys (who contribute to most of the volume) is starting to wane. Many catalysts can spark a shift in the other direction (the Fed on Wednesday to name just one), but changes in relative volume (not just low or high) is the real magic number you want to keep an eye on to stay one step ahead of the big price moves that follow. -MD

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