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A Rising Tide Lifts All Boats

Just about a week ago, the bears were celebrating another chapter in the trade war saga and what was set to be yet another plunge below the 200 day moving average. Well, fast forward a mere 6 sessions later and not only has the 200 day been left in the dust, but also the 50 day (a level where institutional buying is known to occur) is now finding support.

And the bulls mostly owe it all to the shorts (even more so than to the Fed and the tweets), because it’s the sheer number of bearish folks and their apparent disregard of market internals that makes the inevitable short squeeze possible.

TVO, our long-term volume oscillator, reversed towards positive values at the end of May, signaling us to go long just before the run up. A couple of trades later and we’re on track to recover most of the “sell in May” losses with our overall account return now up around +15% for the year.

As far as volume goes in June so far, there hasn’t been a convincing day in either direction since the last across-the-board distribution day on 5/31. Nevertheless, TVO continues to climb as sentiment is shifting and the tide is slowly rising. The ride may be a bit bumpy, but rest assured where volume goes prices will follow. -MD

Sentiment: SKITTISH – Market distribution is heavy and aggressive and big institutions are selling to preserve their capital.

Volume: 1% – Today’s volume was higher than the previous session.

Real Feel: COOL – Bulls and bears were at a stalemate for the session.

Cycle: BULLISH II – Retail investors are overly cocky and heavily positioned in their holdings.

Portfolio: HOLD – The market is in a period of indecisiveness and the best place is on the sidelines.

Next Day Move: SIDEWAYS UP – The probability that SPY will close positive in the next session is 54%.

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The indicator descriptions in the above graphic represent general market sentiment. The actual TVO System signals and trades are listed below in the Members Area. To view, please . Not a Member? Join us.