TVO Market Barometer 1-19: Which way will the hammer fall?

The US government is in the midst of a crisis that’s not going to be resolved anytime soon… oh yeah, and right now there’s a government shutdown going on too. The point is there’s always something going on, so as a trader if your actions hinge upon the forever unpredictable ways of those on Capitol Hill, you’ll be forever second guessing with eventually not much capital left to second guess with.

Options expiration last Friday took the indices to all time highs once again, with SPY logging a volume accumulation day in the process. It seems that the more folks talk about how they’re ready to buy the next dip, the more the dip gets put on hold and higher we go. But what about Monday? The down futures are already bringing out the “I told ya so bears” in droves (who were mysteriously silent for the past 2 weeks).

And the real question is why would big institutions step right into the rally right before a possible recipe for disaster in Washington? Well, the likely answer is that the shutdown-a-phobics already got out in the sell off last Tuesday. Markets operate in future time and despite what many folks think, the big boys are not the gambling type. And because it often takes them several days if not weeks to get in and out of their positions, moves like these have to be discounted well before the hammer falls.

Volume-wise, TVO picked up on the shift in sentiment last week as the oscillator started to reverse towards negative values. Does that mean the bottom falls out from here? Well, the market is still almost non-existent as far as distribution days, so any drop from here will likely be short-lived, at least for the time being. -MD

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