Max,

I was out yesterday and coudn't get to this question.

A Follow-Through day is a day on a major index where the price moves up significantly on volume higher than the day before on day-4 or later of a rally attempt. Bill O'Neil stated a week and a half ago that he considers 1.75% the current definition of a significant increase. Mareket volatility causes this threshold to change from time to time. We wait out the first three days in a possible rally as short covering causes confusion in reading sustained buying interest.

So what has happened? On 6/21 when we got a sizeable 2.2% jump up in price on the NASDAQ on volume higher than the day before. It was day-2 in a rally attempt, too early. A rally attempt begins on an up day after a market decline. The count continues unless another intraday low is made, where the count gets reset and we begin looking again for a fresh rally attempt. It is important to know that IBD's definition of a positive close is from close-to-close and not open to close.

There is a confusion factor however as it is possible to count a down day that closes near the highs of the day as a day-1 count. So a new intraday low and rally to close near the highs of the range but still below yesterday's close can count as day-1. June 16 comes close to meeting this definition when the NASDAQ closed in the middle of the range after trading lower. Two people looking at the chart could reasonably make a call in either direction on June 16. If you call it day-1 in a rally attempt then the action on June 21 was a valid day-4 FTD. My view of the action on 6/21 was that is was a true FTD. IBD took the opposite view however. The market has clearly rallied on low volume off of this signal and left most behind in cash.

My view of the long-term situation is that we entered a bear market after the 5/02/11 top. I could be proven wrong of course. Under the market has already topped scenario the current rally is building the right shoulder of a head and shoulders pattern. This would imply the rally coming to a halt before making a new high. I would be seriously wrong in my view if the market makes a new high and continues to rally. So 2887.75 on the NASDAQ is a key level in my opinion. Stalling action prior to reaching this level could be an optimum short taking point. We need to remain nimble without a fixed view and let the market tell us what it is doing.