Day 3 of Rally Attempt

 

Today marked day 3 of a rally attempt which started last Wednesday. When counting rally days, note the first up day is not counted. If one of the indices closes up 1.7% on above average volume (a follow through day), this rally attempt will be confirmed, and it will be time to look at getting back in the market.

A case for IBD tops and bottoms

Investor's Business Daily has a 70-80% track record for calling tops and bottoms. The chart above shows when when "The Big Picture" section stated market corrections in red and market rally's in blue. Check out the article "Look For Follow-Through Day To Start Uptrend" in the Investor's Corner section of investors.com for more info.

A Bottom- NOT!!!!

Today's reversal was impressive, volume was the highest its been in weeks, and the indices ended strong with 2% gains. Does this marked the bottom? Or an oversold rally? Only the market knows, so why risk it with IBD 80% track record. Your best bet is to wait for IBD to end this correction and call the new rally. This could be the start of a rally attempt.

Attempted rally intact- waiting for confirmation day

Today was the 4^th day of a rally attempt (see blue highlighted area) and while the major indices all closed with a better than 1% gain, volume was at or below average, suggesting big institutional buyers are not ready to get back in. The Today’s leading groups are Machinery-Farm (CNH, ), Fertilizers (CF, POT, MOS, AGU), Machinery Mining (BUCY), Oil Service (NOV,ATW, DWSN).

See saw action ended with slight gains on the major indices

This is the second day of a rally attempt, so still too early to get into the market.

Wednesday's bounce was nice, but. . .

Greater than 1% gains on the S&P, NYSE, and DOW, on solid volume make for a great day, but digging deeper reveals some flaws to yesterdays bounce. Most importantly, this is only one day. An upward trend of at least 4 days need to be established from yesterday's rally. Then another "big day" (what IBD calls a Follow-Thruough) is will be needed to validate the upward trend.

Other flaws to yesterdays action include declining issues outnumbering advancing on both the NYSE and NASDAQ, and weak action among market leaders, as measured by the IBD 100.

Allegheney Energy Inc (AYE)

During corrections, it's a good practice to scan for stocks holding up against the markets slide. AYE came up on today's scan. Note the above average volume (blue bars ) during the up weeks against the below average volume on the down. This is one to keep an eye on.

Q4 New Buys Of Top Performing Mutual Funds

Following New buys from top funds is following the "smart money". Institutional buying makes up 80% of the market, so following on the dovetails of top performing picks pinpoints stocks in demand. Here are notables with good fundys and technicals:

ISRG BIDU VMW AMZN GOOG RIG YGE

Market In Correction

With Friday's action, the major indices are well below their 200-day lines. More importantly, down days have been on higher volume, suggesting institutional selling. Now is the time to cut losses and stay on the sidelines until buyers come back.

What does this mean? The currect market trend points is down. Recent weeks have shown higher volume selling and a lack of buying. CANSLIM defines these are Distribution Days. This is a time to cut losses and be on the sidelines. Expect mini rallies from bottom fishers, but don't be fooled. No rally in the 50 year history has started without a "Confirmation Day", and IBD has a 70% track record of picking bottoms. Stay tuned. . .

Nice writeup on CYBS in today's New America. This is a play on the growing trend toward online shopping and fraud detection.

Keep an eye on the Electrical Equipment Industry. Currently 3 years into a 5-7 year buying cycle with surging demand from emerging and