The market staged a pretty powerful rally yesterday. The employment report was a blowout and Powell said all the right things. The major averages opened strong and rallied higher most of the rest of the day. The gains were good with the COMPQ and the NDX higher by 4.26% and 4.48% respectively. The SPX rallied 3.43%. All the major averages closed near the top of their intraday trading ranges as there was buying pressure through the session. Volume was mixed. It was lower on the Nasd but slightly higher on the New York. That was enough to produce a new follow through day on the New York averages. Since there was a new follow through I created a new leaders index. It consists of 20 stocks in 15 different industry groups. I have attached a text file with the symbols. I must say that it was very difficult to come up with enough stocks to produce a good index and the stocks are more in bases with few already moving higher. This is likely because there aren’t many stocks moving higher right now. The index was higher by 5.24% yesterday and closed high in its trading range. Volume was higher and above average. There are several things we have to look at now. Yesterday’s action reinforces the case that we are in a bear market because almost all the biggest single day rallies come in bear markets. If the COMPQ is up more than 4% it usually qualifies. We now have another follow through in a bear market. We know most of them fail, but there are tradable rallies in bear markets. The question now is if this is one of them. So far the follow through is not well confirmed. The Eureka signaled, but it is the least important of the three. The %E’s are too high and will not confirm. The weekly Coppock is still headed lower, but the decline is slowing. It could confirm in the next week or so and we will get a better picture of next week’s action on Monday. Frankly the fact that there are so few attractive stocks right now bodes poorly for the follow through. Tradable rallies usually have a good sized number of stocks that you want to buy. I don’t find many now. The fact that it was so hard to find enough stocks for a new leaders index and the action of those stocks was not as good also is negative. Although the relative strength line of the new index is at a new high. At this point the most important thing to me is the weekly Coppock. It if signals and confirms the follow through the chances of a tradable rally increase a lot. If not this latest follow through will likely fail. Since there really aren’t many stocks that look attractive right now if you are going to participate ETF’s are a good way to go. Jerry
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