IBD Follow Through Day (FTD)

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IBD has declared a follow through day, indicating the market is in a “confirmed uptrend”. In the IBD dogma, this means it is ok to start looking for good growth stocks breaking out of bases. Their ETF strategy says go 100% QQQ when in confirmed uptrend, go down to 50% when “under pressure” and 0% when “in correction”

here is what they said:

The S&P 500’s 1.4% gain amounted to a follow-through day on its rally attempt. The Nasdaq picked up 1.1% and the Dow outperformed, rising 1.8%. Volume on the NYSE and Nasdaq rose slightly from Monday’s levels.

The Russell 2000 small-cap index rallied 2.1% and the IBD 50 rose 1.3%.

On the NYSE, advancing stocks trounced decliners by 5-to-1. Breadth was less impressive on the Nasdaq with winners beating losers by more than 2-to-1…

On strong up days for the market, it’s typical to see money flow out of bonds and into stocks, but that wasn’t the case Tuesday. The 10-year Treasury yield eased 1 basis point to 1.99%.

The S&P 500’s 1.4% gain didn’t exactly convey power, but it still must be respected. A follow-through day doesn’t mean the market is about to rip higher, but no bull market has ever started without one.

It’s always good to see the market serve up buy candidates on a silver platter, but the platter was mostly empty Tuesday despite a solid showing for the major averages. If the market continues to strengthen, though, they shouldn’t be hard to find in coming days and weeks.

That being said, I am not happy with their call. First, they never mentioned an “attempted rally”, though I did. They usually maintain that you need strong volume on the FTD, at least stronger than previous day. The S&P was clearly lower volume than previous day…http://stockcharts.com/h-sc/ui?s=%24SPX

Over the last 10-15 years they have been saying that the market is more easily manipulated, so the old 1.5% up day threshold should be higher, like 2-2.5%. We did not hit that today.

That said, the Fed yacks tomorrow, that may give us the real volume we need. Barring that, I will not go in as strong as I might with a strong FTD. (Yes, all rules have a little leeway). I will be adding more to the 1YPEG stocks in my portfolio

Market has been following moves of oil. China was down big, but oil was up on Saudi whispers to “do something”, so market up.

Again, I am not exuberant about this.

They go on to say this…

The market is back in a confirmed uptrend, but there’s no need to be overly aggressive, especially when there’s not much out there to buy.

As IBD says, “let the market tell you what to buy.” Right now, the market’s message is to stay patient and don’t put money to work too quickly. If the follow-through has staying power, new leadership should eventually emerge…

Start by buying a couple of institutional-quality stocks as they break out from solid patterns. If those advance a few percentage points, you can add shares and even more shares once their gains reach 5%. Such “pyramiding” helps control risk.

Growth investors will be watching for earnings from Facebook (FB) Wednesday and Amazon (AMZN) Thursday, although both are still well below their 50-day moving averages as they consolidate gains. The pullbacks for both have been well contained but neither is near a proper buy point.

That is to say, to “confirm” the FTD, we want to see some growth leaders form good bases ready to breakout and buy, without that, the FTD does not have as much meaning. You can see yourself there are not many.

For those of you waiting to start adding more to your 1YPEG, maybe this is one more sign to nibble a bit more.

A couple that have held up in the decline, and therefore might attach strong institutional interest in and up market…

http://stockcharts.com/freecharts/gallery.html?abmd

http://stockcharts.com/freecharts/gallery.html?casy

Both above the 200dma, ABMD also above the 50dma. Casey trying hard to move above the 50dma for those that add that to their fundamental analysis.

Facebook looks decent from the chart, and we know we likes its Fundies.
http://stockcharts.com/freecharts/gallery.html?fb

No need to make this a huge thread, just relaying what the IBD says with a little color.

P.

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CASY, ABMD and SEDG are holding up very nicely. I added some CASY today.

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Keep in mind the “confirmed uptrend” could also be a counter trend rally in a bear market.
Not calling for it one way or another, but keeping an open mind until the market shows me one way or another, as it is kinda in no man’s land right now.

FB has ER tomorrow to, so be aware if you are adding to it. I agree that it looks good here though

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In recent weeks the market is in lock-step with oil futures. So “market in confirmed uptrend” means “oil in confirmed uptrend” and I am skeptical about the latter.

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The market does seem to correlate to oil recently. Also there is a lot of angst over interest rates. However, actual and projected earnings should trump both interest rate worries and oil now that we are in earnings season. After we get through that I think I will take a nap for two months ;o)

bulwnkl

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The market does seem to correlate to oil recently. Also there is a lot of angst over interest rates. However, actual and projected earnings should trump both interest rate worries and oil now that we are in earnings season. After we get through that I think I will take a nap for two months ;o)

Bulwnkl - I agree and you have a key word in there. If successful then Wall St is going to love the pro-business agenda and of course it will create much merriment for the world at large, (except for Mexico obviously).
Ant
:wink:

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I think the oil correlation is in large part related to distressed oil debt held by large banks. A lot of that looks similar to some of the pre 2008 mortgage stuff to me…
Not exactly sure how bad it is, but until oil stabilizes a bit markets are going to keep being on edge, especially since both rates and oil prices will effect that debt and the small oil producers’ ability to pay it back

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Unlike houses ,an oil company can be sold off bit by bit, expenses can be reduced, they can merge or be bought out , etc. So I doubt if oil company debt is as bad as mortgage debt. I presume that those lending to oil companies at least avoided the real estate “liar loans.” But maybe not, artificially low interest rates encourage reckless risk taking by borrowers. In this case either higher rates when they need to rollover our lower oil prices are both bad news.

Re IBD “follow through” my indicators haven’t budged. Except perhaps for ultra short term and ignore those.

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Thank you Peter, much appreciated
Erik

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As I said last night, this did not feel like a good FTD and I felt they might have been giving it away too easily. I have felt this way a few times over the last few months where they have thrashed back and forth, seemingly playing a little loose with the “rules”. We were looking for a real move based possibly on today’s fed or the setup of growth stocks. The Fed disappointed and down we went. We barely had volume in the FTD and we paid for it…

Today they now declare the market is “under pressure”. Duh. The volume today was higher than yesterday on all 3 major indexes. As others mentioned, there were perhaps too many other indicators missing to increase the probability of success.

Back to pure fundies! :wink:

In the wake of the U.S. central bank’s first announcement of the year on interest rates, investors sold stocks heavily following hints that the Fed intends to stick with plans to raise the cost of money.

The Nasdaq slid 2.2%. The S&P 500 dropped 1.1%, buffeted in part by a spirited rise in oil and gas, mining and banking shares. The NYSE composite, which has more of those commodity stocks, lost 0.6%.

Higher volume on both sides chalked the market up with its first distribution day (intense professional selling), just one day after the Nasdaq and S&P 500 staged a follow-through.

The Nasdaq easily undercut Tuesday’s intraday low and hit its lowest close since Oct. 23, 2014. A wild reversal by the S&P 500 was also negative; thus, IBD’s outlook on the market was downgraded to “Uptrend under pressure.”

Tuesday’s follow-through had already proved to be hollow. The new-highs list looks worse than California’s drought. When few stocks make new highs, it means that breakouts are scarce.

An astute investor is always ready to deploy cash on or soon after a follow-through. He or she should be able to choose from among at least a few outstanding-quality companies that have staged light corrections, completed sound bases, and are poised to break out to new highs.

Notice that bogus “typo” on the Naz low. No idea how that got in there!

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I am going to say today is the day I would have called the proper follow through day. There may be some short covering because of the BOJ move, but not enough to account for all of this. If the volume is strong, I become much more bullish in my 401K mutual funds buying and in my individual stock buying. But that is just me.

Don’t forget, yesterday was a very nice bounce off the daily low to finish near the highs with good volume. Sounds good to me.

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