General Market Outlook: The Market staged the elusive follow-through day today, the 17th day after its first rally attempt. Both the SP 500 and the Nasdaq were up more than 3% on increased volume. Proceed with caution on the long side as this is still a headline driven volatile market.
Market Condition: → Late follow-through, cautious uptrend
The technical view: After last week it looked like the chance of any meaning follow-through faded. Today however the market was able to stage a follow-through day. This occurred on day 17 after the first rally attempt. Typically, follow-throughs occur usually day 4-10 after the first rally attempt. It still is possible for a sustained uptrend to occur even with a follow-through this late in the cycle. This however does not give a clear go-go green signal as the indices still have some work to do. The SP 500 is still below the 200 day line which was a point of resistance, although as shown on the chart the SP 500 did reclaim the 50 day moving average. The Nasdaq Composite closed above the 2600 level which has been an area of support/resistance in this recent past. The Nasdaq however is still below the 50 day and 200 day moving average.
Investors who are willing to commit some money to this change in market should proceed with caution, and look to some of the leading stocks that have bucked the trend in this market. At the same time investors should be aware if any new distribution days start popping up, distribution days after a new rally tend to derail the rally. If this new rally is sustainable it should not take too long for many leaders to emerge and breakout of solid consolidations to near new highs. We will be watching for this. Please contact us if you have any questions, and as always refer to past reports for more on the fundamental view.
