7-26-12 After the Close

It looks like we had a FTD today.
There are rare instances when the first day of a market advance (Rally Day) can occur prior to a buy switch being turned off. It has happened five times since the beginning of the NASDAQ. Usually a Rally Day will be identified after the market goes into correction as normal corrections produce a string of lower lows which will produce a later Rally Day.

Using the Market School definition of when the last NASDAQ buy switch went off it was on 7/16/2012. IBD put the market in correction on 7/24. In either case July 12 is a Rally Day and today was day 11 in the advance. July 12 is before either definition of the buy switch being turned off. This remained the Rally Day as long as it didn't get undercut which it [U]almost [/U]was yesterday.

These rare Rally Days occur when the market makes a significant decline before the buy switch is turned off and then does not make a lower decline after the buy switch goes off. It just rallies again.

Rare Event Rally Day Definition is as follows:

If we get a FTD sized event as we did today after a buy switch goes off the proper rally day will be associated with the lowest low that occurred between that FTD and the highest high made since the FTD that began the prior rally. The highest high after the last FTD was on July 5. Between the FTD-sized event today and the prior July 5 high, the lowest low was July 12. That day is a "pink" rally day as it closed in the upper half of the range. As long as that day is 4 or more days ago it is a valid RD for today's FTD, it was 11 days back. The Market School Model further requires that the lows of a market advance (July 12 in our case) must undercut the 21-day ema, it did. This 21-day requirement is not stated in any of Bill O’Neil’s books but ended up needed to handle rare instances in the automated Market School Model. The Market School Model requires all lows associated with every Rally Day to undercut the 21-day ema.

We should have gotten two buy signals today: B1 (FTD) and B6 (NASDAQ lows above a rising 50-day moving average). The NASDAQ 50-day eked out a slightly higher close today.

My current positions are N and SSYS. It is a choppy market and pot holes are everwhere. FB, CAB, CERN, TFM and CSTR are selling off after the market closed.