There was no update Thursday due to a data problem. I said in the last update that the market looked like it was weakening and possibly rolling over. Right after that the market rallied for two days in exactly the opposite fashion than the two previous days. The market had a strong session yesterday. The major averages opened a little higher and mostly traded sideways until the last hour or so. Then buying came in and all the major averages rallied hard. They all closed at or very near their intraday trading highs, a sign of strength. The gains were pretty evenly divided with the COMPQ and the NDX gaining 1.24% and 1.55% respectively. The SPX was higher by 1.66%. Volume was mixed. It was lower by 8.68% on the Nasd and higher by 5.41% on the New York. This combined with the price advance on the SPX produced a follow through on this average. Leading stocks did well too with the leaders index gaining 2.27% on the day. The index closed high in its trading range on a huge spike in volume. This was due to a giant volume increase in the volume for VIPS. The index also bounced nicely off its 50dma. The action of the market in the last two days was the opposite of the previous two sessions. Tuesday and Wednesday saw the market weak and selling off into the close. The last two days saw the market rally solidly into the close. We got follow through action in the SPX, which should increase the confidence in the rally somewhat. The Nasd averages continue to lag. There is a clear declining tops pattern in the charts of the Nasd averages and a downtrend line can be seen. The Nasd averages must overcome the downtrend lines and their 50dma’s to rally further. The action in the New York stocks looks better as the INDU made a new closing high. The small and mid-cap stocks, along with the semiconductors also are acting well. The picture improved with Thursday’s and Friday’s action, but there are reasons for caution. The market is a bit unstable right now and could easily turn down again. Here is clearly a bid under the market, likely due to the massive liquidity being pumped into the system, but getting to aggressive now would be dangerous. Jerry
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