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TVO Market Barometer 12-04: Will we “stay the course” or give in to fear?

On Wednesday, markets were closed as our nation honored an American President. But in the financial realm, the “tariff man” was still front and center, as the latest round of fear mongering seems to have markets firmly at bay. Currently, overnight futures have seen better days… but has anything really changed? What’s going on?

Back in October, my friend “RK” (whose well-known fund is still sailing strong while other hedge fund boats have long been taken in by the storm) said to me that, despite the sharp decline, “there’s just no real fear in the market.”

And that’s exactly the problem.

As the S&P 500 bounces up and down like a mad man on a trampoline, that real fear, like the kind that ushered in past bear markets in ’87 and ’08, is suspiciously absent. For most folks, it’s clearly no longer looking like a bull market, but with last week’s shot right back to previous highs, it’s not quite looking like a bear one either.

There are many reasons for fear on Wall Street, but perhaps one of the big ones is navigating a market without a clear trend. As a trader, whether you’re a bear or bull, without a trend, you have no friend.

The “real fear”, though, that will eventually bring on the next bear market will come not from Wall Street, but from Main Street. When everyone BUT the traders start to panic (like my concerned family members who thought I was crazy when I bought my house in ’08), then we’ll know something scary is going on.

TVO, our long-term volume oscillator, now at LIMBO is clearly reflecting the “no fear” hypothesis. We are currently, however, making our way back to positive values, so volume is still favoring an overall market uptrend at this point. Whether the market will listen and “stay the course”, well, we’ll just have to wait and see. -MD

Sentiment: LIMBO – Markets are neutral and sentiment can go either way from here.

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

Real Feel: SCALDING – Bears dominated the session and buying was practically non-existent.

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

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

Next Day Move: UP - The probability that SPY will close positive in the next session is 56%.

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