TVO Market Barometer 12-1: How long can the market stay topless?

The tax bill passed, the Dow dropped 300 on fake news and quickly recovered (another reminder why we never use stops), and to the dismay of lot of folks, this rising parabolic market is really on the verge of being obscene. As far as market internals, however, the naked truth is that there isn’t anything that unusual (for a bull market that is) standing out to grab attention.

The Heat Gauge finished the day straight down the middle at COOL, and even with the so-called “record volume” drop on Friday, volume for the day actually fell overall. Not exactly the sign of a market in “blow-off top” mode. The Issues Oscillator is still at level II OVERBOUGHT, but the values are now heading lower towards OVERSOLD. TVO, our Total Volume Oscillator, at EAGER is just starting to settle into the range which historically signifies healthy market conditions.

Last week before the vote we decided to take on a bit of exposure (risky to some but hardly indecent to others) and went long SPY calls. But aren’t we worried about all the traders who have been touting this long-awaited tax bill as an obvious “sell the news” event?

Well, they may want to take a cue from trading legend Jesse Livermore who wrote, “The stock market is never obvious. It is designed to fool most of the people, most of the time.” The one thing that is obvious, though, is that the big smart money players are never fooled (they’re the ones doing the foolin’) and as far as they’re concerned right now the party is just getting started. -MD

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