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Can SageMaker DeepAR algorithm only deal with training data that resides in Amazon S3 buckets?

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Yes, it appears to be so. Look here for more details.
Here is a small, but important, extract:

"Just like other Amazon SageMaker algorithms, it [deepAR] relies on Amazon Simple Storage Service (Amazon S3) to store the training data and the resulting model."

Hope this helps.

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