12-1-11 morning comments

Yesterday we had a B3 market buy signal, lows of the NASDAQ above the 21-day ema. This buy signal is not acted on until the buy switch is turned on via a follow-through day (B1) or closing above the highest high since the last FTD (2753.37). I have attached the latest Market School chart from yesterday's close. If we were to see a FTD on the Dow, S&P or NYSE Composite these indices do not show a B3 signal yet.

Today is the 4th day in the rally count on all indices so today is the first day that a valid FTD can occur. A FTD occurs on day-4 or later in the advance with a close 1.25% above the prior close on volume higher than the day before. Yesterday's volume was quite high, setting an unlikely high mark for today.

As Jerry mentioned in his comment about the leaders index, 4% moves generally belong to bear market periods. The statistics are as follows. Since October 1979 there have been 157 4% or greater up or down moves in the NASDAQ. 144 of these (94%) occured during a bear market. 6% occured in bull markets during distinctive periods such as the 1999 NASDAQ blow off top period. No +- 4% moves occured in history during bull market periods like today's directionless market. The odds continue to build that we are still witnessing a bear market move. This does not mean the market can not rally however, it is just the expectations of a big move up are quite limited in my opinion.

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