Quote Originally Posted by buzzman View Post
Mike, thank you. That all makes sense. But, I got the impression that IBD indicates somewhere in their publication whether or not the trading day met the FTD requirements. That is, they calculate it for everyone. Is that not the case? bz
Buzzman,

I have been away and so this answer is late. I was attending what IBD calls Market School, a new seminar that they have recently established. The seminar was actuall fabulous. I will report on that seminar in a later post. It relates to your question. It is the Big Picture column that discusses all follow-through days. What is kind of hidden is the FTD threshold. Prior to year 2000 a 1% threshold was used. After this date 1.25% can be used however sometimes this is adjusted for market volatility such as what we often see in a bear market.

So, what is a follow-through day? When the market has been declining in a correction there comes a day that the market closes up either from the day before or earlier in the day. This last part can be seen as a wide range day that closes in the upper half of the range (a shakeout day or hammer candle). Anyway, that day is called a Rally Day or day 1 of a rally attempt. It does not mean that the market is in a confirmed rally yet, it does however mark the beginning of a potential rally. On the next two days we will not call a FTD. Too many shorts are being covered in the first few days of a rally to understand the real buying action of the institutional players. On day 4 or later we now watch for a day that moves up more than 1.25% on volume higher than the day before. This must occur on one of the following indices: S&P 500, NASDAQ or NYSE Composite. Sometimes the Dow Industrials are used for this but remember it is an index of only 30 stocks. When this move up on higher volume occurs we call it a follow-through day. If the Rally Day is undercut on an intra day basis the process resets and we start looking for a Day 1 again.