Today the Heat Gauge fell below zero (-1), which tells us that up-volume came in ahead of down-volume. However, overall volume took a drop, which is generally viewed as not a good sign for the bulls. To all the fine dedicated readers of this blog I’m sure this sounds familiar, but now with TVO HG we can get a sense of the volume magnitude by giving it a number value. How do things turn out the next day in the market after this happens? Well in the past 15 years there have been just over 1100 occurrences where the HG was negative along with sinking overall volume. 47% of the time not much happened the next day in the way of volume accumulation or distribution, so one might say the market digested the move or consolidated. There was moderate to heavy accumulation or institutional buying 13-15% of the time, and only 10-13% of the cases resulted in distribution or a selloff. So the moral of the story is shorts beware… because even though the bounce may seem weak, most of the time the bulls are just building up steam. -MD
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