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Surprise: IBD Calls a Follow-Through Day and Markets Back In Confirmes Uptrend.
For those who don’t have access to this weekend’s Big Picture column, here are some major excerpts:
“Stocks posted solid gains in Friday's shortened session, ending the Nasdaq's string of six weekly losses in a row.
The Nasdaq and the NYSE composite on Friday each rose 1.4%, while the S&P 500 rose 1.3%.
The IBD 50 added 1%.
Naturally, volume was down in the shortened session. However, gauged on a same-time basis, Friday's partial session showed rising volume on the NYSE.
Because Friday's session was three hours shorter than usual, judging total volume is an apples-to-oranges comparison. But making an hour-to-hour comparison, NYSE volume was up. A similar comparison with Tuesday's trading also showed a jump in Friday's volume.
That's significant, because the higher volume trend coupled with the indexes' gains Friday resulted in a follow-through. That acts as a bullish signal on the fifth day of the market's rally attempt.
Other indications of late have been favorable, including the indexes' close near session highs for five days in a row.
IBD Chairman William J. O'Neil said Friday there were many factors that support the conclusion that Friday was a follow-through.
He noted that during the correction "most of the indexes have made three waves down and the last ones were a little steeper." That resulted in the put-call volume ratio rising above 1.0 a week ago and, O'Neil added, was further evidence of a market bottom.
Although a market follow-through is a good sign for the market, it's smart to wade in carefully. Start buying half-positions in leading stocks that are in sound buy areas. If those stocks and the market continue to prove themselves, you can increase your exposure to the market.
Other technical action was generally bullish Friday.
The S&P 500 and the NYSE composite closed above their 200-day moving averages for the fourth session in a row. Friday's action left those two indexes closer to their 50-day lines than to their 200-day lines. The Nasdaq, however, remains below its 200-day line.
Gains were broadly based. Winners led losers by a 5-1 ratio on the NYSE and by a more than 3-1 pace on the Nasdaq.
Apple (AAPL), which accounts for 10% of the Nasdaq's weighting and has been an engine for the market for years, popped 1.7%. The stock remains 18% off its high.
While Apple's recent correction is the sharpest in years, the decline did have a possible benefit. Apple undercut its previous base, which resets its base count. Any new pattern will now be stage one.
A first- or second-stage breakout is more likely to work than a breakout from a later-stage pattern.”
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