Quote Originally Posted by mnoel View Post
Hi Mike,

I don't remember if it was you, Billy or someone else. But a few years ago, I remember that someone made a mention about the importance that the low of the FTD should not be broken, otherwise, the rally could be declared over. If it is the case, what are the conditions to confirm a rally again? Is it a new FTD?

Thanks in advance,

Martin
Martin,
A close below the lows of a FTD usually leads to a failed rally but not always. How the Market School Exposure Model handles this is this is an S1 sell signal (Follow-Through Day undercut). Usually when this happens the exposure is very low to start as the rally has to be weak to be undercutting the FTD lows. This often takes you down to zero exposure. It does not turn the buy switch off however (same as saying market in correction). To turn the buy switch off requires either zero exposure with a full distribution count or undercutting the entire rally attempt (undercut the prior low where the rally count started prior to the FTD). When the buy swtich goes off we wait for a new FTD. There is a rare instance when the buy switch can be turned on by rallying up above a prior marked high on the chart (9-day high looking both ways). This is quite rare to occur without seeing a FTD.