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TVO Market Barometer 7-10: Here comes the shakeout.

After the late June reversal, markets had an impressive run up over the last week (which included no less than 2 across-the-board accumulation days) taking us within a stones throw of previous highs.

What’s next on the agenda? Well, the shakeout of course.

It shouldn’t really surprise anyone that a heavy volume-fueled run up needs to lighten the load to continue higher, but it always does manage to do just that. The element of surprise, however, (which always seems to magically coincide with some erroneous news event) is exactly the reason why the shakeout is so effective.

The severity of the move can vary, but considering that TVO, our volume oscillator, has now reversed direction back towards zero, any drop from here will likely resolve itself very quickly. In fact, the ordeal in hindsight is often quite the buying opportunity.

Last Friday, our Heat Gauge (HG) gave our members exactly that and we were able to secure a gain on our SPY calls of +42% at Tuesday’s close. Whether this week’s impending shakeout is one to be bought remains to be seen, but with our Next Day Move strategy at a firm 63% success rate for the year (15 wins out of 24 trades), if HG says things are going “UP”, you can bet we’re going to listen. -MD

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

Volume: -3% – Today’s volume was lower than the previous session.

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

Cycle: OVERBOUGHT III – Retail investors have bitten off way more than they can chew.

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 55%.

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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.