My Trading Licks

Overall volume rose on Wednesday in what was the first across-the-board distribution day the market has seen in almost a month. And when we had a distribution day on 2/7, a month had also gone by since the last distribution day before that.

Will the market open up every month in 2019 with a sell off, then quickly return to business as usual, rinse and repeat? Quite possibly, but you may not want to bet too heavily on it.

From my perspective, as far as volume and market internals, whether we resume the climb up the wall of worry depends on one of 2 things: Either TVO or IO needs to stay above zero (which can be easily seen in the TVO MB chart of the last 20 trading days).

And what if one of them slips below the zero line? Well, that’s when our systems have historically triggered some their most profitable buy signals. That’s also when volatility (or the VIX) tends to run high, so it’s not always an easy trade to stomach.

But as legendary trader Linda Raschke said, “Some of the best trades come when everyone gets panicky.” Case in point… our last TVO trade we made off the December ’18 low yielded a +184% options gain.

As for what’s on tap for SPY on Thursday, our Next Day Move is saying UP. I’ve noticed, however, that the more times NDM says the same thing in a short time period (this is the second UP this week), the less likely the predicted direction will happen.

We are taught from a young age that “if at first you don’t succeed, try, try again.” While that approach is certainly good from a competitive standpoint, trading is not a contest to be won, but rather a matter of survival. If you don’t know when to stop trying again, the market will often make sure you don’t get a second chance. -MD

Sentiment: EAGER – Markets are in accumulation mode and big institutions are buying at a slow and steady pace.

Volume: 4% – Today’s volume was higher than the previous session.

Real Feel: SCORCHING – Bears dominated the session with a minuscule amount of buying under the surface.

Cycle: BULLISH I – Retail investors are confident and slightly overweight in their holdings.

Portfolio: BUY – The market is healthy and it’s a good time to contribute to long-term investments.

Next Day Move: UP – The probability that SPY will close positive in the next session is 60%.

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