IF you had been following the old “under pressure” thread here:
http://discussion.fool.com/ot-ibd-underpressure-32218958.aspx
You would know that the market was fighting a lot of distribution days and were barely able to keep out of a “market in correction mode”.
We seen some rays of hope recently and today the unexpected housing data made everyone happy. We had a big move on pretty decent volume.
http://stockcharts.com/freecharts/candleglance.html?$INDU,$C…
The major indexes surged Tuesday, in what amounted to a favorable change for the market’s outlook.
The Nasdaq roared 2% – its best day since March 1 – fueled by chip, software and other technology sectors. The S&P 500 added 1.4% and had its best outing since March 11.
Participation was broad, as the small-cap Russell 2000 added 2.2% and the Dow utilities climbed 1.1%. Winners beat losers by nearly 10 to 3 on the NYSE and 7 to 2 on the Nasdaq. Volume rose.
The combination of ample index gains and higher volume showed that institutional investors were busy diving back into stocks. Indexes had weakened as signs emerged that an interest-rate increase could occur as early as June. Now, those worries have taken a back seat, even as more Fed officials echoed that possibility this week.
There are still distribution day counts of 8 on Nax and 7 on S&P, so we are not out of the woods yet, but the trend lines are better. We don’t care about those, but many do, and that can make them self fulfilling.
That’s the counterpoint to Tuesday’s bullish action. While a confirmed uptrend should mean increased exposure to stocks, investors must remain cautious before getting into deeper waters. There have been false starts, such as the Nasdaq’s May 6-10 rally, which ended abruptly at the composite’s 50-day moving average.
Tuesday, however, the Nasdaq climbed back above its converged 50-day and 200-day lines, while the S&P 500 moved back above its own 50-day average. That signal was a factor in deciding to change IBD’s outlook.
I have noticed that when we are in a declared correction and then get a follow through day, the distribution days are “erased” and the count starts fresh. When we pull out of an “under pressure” situation like now, the distribution days stay on the board, indicating this is not as strong and that more caution should be exercised.
Probably no updates to this thread unless we go “under pressure”, then a new thread.