TVO Market Barometer 12-14: Is the selling over already?

The bears got an early X-mas gift on Thursday as markets suddenly pulled back off all-time highs. While some folks are busy trying to figure out the reason for the sell-off (Moore’s defeat, Rubio’s revenge, the end of net neutrality, etc.), TVO, our volume oscillator, already decided on Monday (before the “selling of the news”) that markets were getting a bit over inflated. As a result we were able to close out our SPY calls before the drop for a +15% gain.

Should the shorts unwrap their present now before the bulls can regain control, or is this the bearish gift that keeps on giving? The Nasdaq did log a distribution day Thursday, but the other indices are holding their ground. It was a SWELTERING day for the Heat Gauge, though, which means more DOWN may be in store in the near term. As far as catalysts, the Fed is behind us, but there’s still the ECB pre-market on Friday. Beyond that, however, if the bears don’t look to take profits quickly, come Dec 25th they may be left with not much more than a stocking full of coal to deal with. -MD

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