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TVO Market Barometer 10-03: Where there’s smoke, there’s fire.

Most folks on social media know very well that the President’s tweets have managed (among other things) to sink a few stocks now and then. Well, introducing the Presidential Alert, which was sent out to millions of phones on Wednesday, that managed to sink the entire stock market.

Shortly after the alert was sent out (which was only a test, by the way), all the major indices fell sharply, giving back most of the gains for the session. One could argue that this “mini flash crash” is the smoke that will eventually lead to a big fiery crash that many say is long overdue.

From a volume perspective, though, the only fire under the hood is that of heavy institutional buying. While bears were cheering on the imminent demise, overall volume rose 17% and markets logged the first across-the-board accumulation day for the month of October.

Now most traders know that where there’s accumulation, there’s bound to be a shake-out. This time, however, it looks like the shake-out may have started a lot sooner than expected… courtesy of the White House and their brand new alert system.

TVO is still in BUY mode, but the oscillator is starting to level out and could reverse in the next few days. The remaining stops just below SPY 291 will likely be taken out (after all, that’s what shake-outs are for), but in lieu of any distribution, it’s safe to say that the only thing behind the smoke is a lot of hot air. -MD

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

Volume: 17% – Today’s volume was higher than the previous session.

Real Feel: CHILLY – Bulls were in control of the session with substantial selling under the surface.

Cycle: OVERSOLD II – Retail investors are dumbfounded and are rapidly exiting their holdings.

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

Next Day Move: SIDEWAYS - The probability that SPY will close positive in the next session is 53%.

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