Well, here we go again. It was a follow-through on the fourth day of a rally attempt, not Day 3: IBD Market School rules point to the Feb. 11 session as the start of the new rally. While the Nasdaq fell 0.4% that day, it bounced sharply off the day’s low and finished well in the upper half of its intraday range. Such unusual action can count as the start of a new market rally attempt. That’s significant, because a follow-through should occur starting with the fourth day of a rally attempt, no sooner.
The S&P 500 rallied nearly 1.7% in heavier turnover. It too staged a follow-through of its own, although it did not see as vigorous a rebound during its decline on Feb. 11.
Pros: a follow thru day
Cons: it failed last time
Pros: we got the required stronger volume than previous days
Pros: a nice up day in price: 1.59% to 2.21% (Naz). 2% + is what we really want on a market FTD.
Cons: it was less than that last attempt (I believe) and it was barely above average volume on the Naz
Pros: some oil producing countries are talking about reducing production
Cons: they always lie.
Pros: commodity companies are trying to reduce debt. Freeport sold $1B of assets today
Cons: Freeport has $19B in debt!
Pros: Mortgage apps were up according to the MBA
Cons: I think it was mostly refis
Pros: Mortgage rates are low
Cons: Because the economy sucks.
Pros: the Dollar is off the highs
Cons: other countries will try to fix that.
Pros: S&P and DOW successfully tested the double bottom of Jan 19/20
Cons: some people are worried we did not get a capitulation day, like 5% down on huge volume where everyone pukes it up like March 9, 2009.
Pros: At the same time, the Federal Reserve hinted it would be highly cautious about making any future hikes in short-term borrowing rates. In the minutes released from the Jan. 26-27 meeting on interest rates, the U.S. central bank noted that domestic financial conditions had “tightened” during the start of the new year and judged the vulnerability of the U.S. financial system as “moderate on balance.”
Cons: they are out of bullets if they need them.
Pros: we will get a new president
Cons: It is probably one of the current candidates
Priceline major gap up on major volume, so clearly not everyone is scared senseless.
Pros: some of our stocks were up nice, MITK had great volume on a 10% move.
Cons: most were up on lower than previous volume and Casey General Stores had a general disaster. Down 10% at end of day, then I saw it up 11% after hours then back down to the close by the end of AH trading.
as always Careful readers of this column know that over the past two years, numerous follow-through days did not lead to long-lasting uptrends. The poor action that followed the Jan. 26 session and a rare Day 3 follow-through on Dec. 16 testify to the challenges of making money lately. The S&P 500’s follow-through on Oct. 2 lasted much longer
Pros: there were a few chart break outs:
Cons: not really strong volume
Priceline Group (PCLN) helped the cause, gapping up 11% in triple normal trade and grabbing hold of its 200-day moving average. But the longtime leader is nowhere close to completing a decent base. IBD 50 names Ellie Mae (ELLI), Ryanair (RYAAY) and Five Below (FIVE) as well as IBD Global Leaders standout Genpact (G) are acting right as they build the right side of their respective bases.
So what’s my take?
- don’t listen to a guy called PuddinHead.
- I like this better than the last attempt. We have tested a double bottom. We failed before but the world did not end. This FTD takes us to the high of the last FTD that failed, so if we surpass that in a day or so charty people will feel better. The transports did not fade with the market after the failed FTD.
- if you have been hoarding cash, maybe it is time to spend a little on some good 1YPEG stocks, but spread it out. If we are to go back to old highs, there is plenty of time. I have nibbled, but now I will take some bigger bites. I will “trade” back into my 401k funds since I can’t buy individual stocks.
- totally ignore charts and volume and buy companies that you expect to do great.
We all have opinions on the value of this, no need to draw out the thread too much.