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When HG says UP, don’t think twice. TVO MB 3-11

Markets soared on Monday and in the same breath left not only the 200 day, but also the 50 day MA behind in the dust. For every bear who cheered the 200 day break, there were twice as many bulls ready and waiting at the 50.

On the volume side of things, our Heat Gauge picked up on the buying activity last week and we were able to close out our SPY calls from Friday for a +35% gain.

Many folks ponder over whether it’s wise to take on such a position right before the weekend. When HG says UP, though, as far as going long, I rarely give it a second thought.

Knowing when to sell is sometimes a much more complicated process, but in general, selling into strength (and buying into weakness) is a time proven formula. I’m sure you’ve heard that before, but take it from someone who’s tested every theory under the sun… It’s one of the few things you’ve heard of that actually works.

While there was an increase in volume over most of the indices, volume actually fell on the Nasdaq, so, sorry bulls, there’s no claim on the day to accumulation (and the one glimmer hope for the bears to come out of Monday’s session).

Another thing to keep an eye on is there are now 2 unfilled gaps below (SPY 272 and 275). TVO is also getting close to zero (IO is already negative), so it would be no surprise to see SPY setting up to trade in a 10 point range for a while. -MD

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

Volume: 5% – Today’s volume was higher than the previous session.

Real Feel: 3-DOG NIGHT – Bulls dominated the session with selling kept to a bare minimum under the surface.

Cycle: BEARISH I – Retail investors are uncertain and very light in their holdings.

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

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

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