My Trading Licks

Monday’s perilous morning gap down became the catalyst for a shakeout that did what all shakeouts do best: sweep out the stops and effectively take the majority of the longs out of the market. Shakeouts often come unexpected, which is why they are so effective, but their effect is not surprising as this is essentially how the market has operated for over a century.

Our Heat Gauge, an indicator that monitors advancing and declining volume, reached an intraday high of 92.6 (the all time closing high was 98.1), but by the close, the number retracted to 2.4 indicating that advances and declines finished the session more or less at equilibrium. Overall volume continues to increase and is an increasing reminder to shorts – and all the “short under the 200 day” folks – that volume tends to spike at the end of the swing move rather than at the start.

We’re holding a few short term long positions, one of which is back in the money, and the others now have a greater probability of following suit.
TVO, our long term volume oscillator, has been declining since 1/14, and we’re watching for a reversal towards positive values to trig

We’re holding a few short term long positions, one of which is back in the money, and the others now have a greater probability of following suit.

TVO, our long term volume oscillator, has been declining since 1/14, and we’re watching for a reversal towards positive values to trigger a potential long swing entry. In the mid term, IO is deep in negative territory and a reversal here – along with the fact that all gaps in SPY have been filled going back to May ’21 – could signal a renewed interest from the retail investor crowd.

It’s pretty apparent that markets did not hold their breath for the Fed coming up this week, however, many earnings calls – Apple (AAPL), Microsoft (MSFT), 3M (MMM), McDonald’s (MCD) and Boeing (BA) – could make this week’s potential bounce a bit bumpy. – MD

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