IBD called a follow through day on Friday. After our most recent correction, the DOW and S&P started an “attempted” rally Tuesday with an up day. Naz had its up day Wed. After that, the CANSLIM/IBD approach says look for a conviction move in days 3-7. That would generally be a move of 2% up on strong volume (assuming a new low was not set before, which would end the attempted rally).
Friday was up 1.3% to 1.7% depending on the index, while it was not the desired 2% or more, IBD says the fact that it was a huge reversal compensated for that. Essentially the DOW was up 450 off the bottom. Per the dogma, this means the big boys are back in and have committed money. Therefore the probability (based on history) is that they will continue to commit more money. And since the small investor is more nimble, the small investor can get in front of the wave and have a nice ride. (75% of a stock’s move is attributable to the market direction, so the M in CANSLIM is for making sure the Market is in an uptrend before investing new money).
Saul does not give a whit about charts and price and volume, and that is fine. For me, this is like black jack and I can see the dealer is showing a 6. That tells me the odds are more in my favor and I can start betting a little bigger.
I have been nibbling this last week, but this will give me more confidence to take bigger bits.
P.
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I hope the follow-through friday is indeed a sign of reversal. I’ve been deploying idle cash since the August 24th flash crash on every dip, so I’m already committed. However, my gut tells me the rally on Friday was more about investors cycling money back into stocks because Friday’s bad jobs report means the Fed will postpone rate increases till next year. The temporary stop-gap federal budget also helped I guess. But all this means is more uncertainty and volatility through the rest of the year, starting with the federal budget tug-of-war in December, and then the Fed rates shortly after that.
I’m not too worried though, I’m in the market for the long-haul and the positions I’ve been adding to I’m quite comfortable with.
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Invest wisely my friends
CMFSoloFool
Ticker Guide: NTGR and OTEX
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An FTD is certainly no guarantee and they do fail. IBD likes to point out that every major bull market has started with one.
You can never tell, have a great watch list and then have a consistent method of investing. This FTD is a sign to really start watching. See if the up volume increases, showing real commitment by the institutional investors, they are the elephants doing cannonballs into the pool that create the waves up. The more elephants doing cannonballs, but bigger the waves for you to ride. Then one day the pool runs out of water and we have to wait for it to fill up again 
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