The market rallied yesterday after Thursday’s sell off. The major averages opened higher and were positive all day. Late strength allowed the major averages to finish near their intraday highs. The COMPQ led the way with a gain of 1.02% while the SPY was higher by .86%. We regained about half of yesterday’s losses(or a little more depending on the index) and the major averages regained their important 50dma’s. Volume was lower across the board, showing that there was less buying pressure yesterday by large institutional players than there was selling pressure on Thursday. Leading stocks had a generally positive session as well with the leaders index higher by 1.49%. The index is back above it’s critical 17dma, but volume was much lower on the day and well below average. The index continues in it’s recent consolidation pattern, but the relative strength line of the leaders index went into new high ground. The action of both the major averages and the leaders index were positive yesterday, but the lack of volume on the rally was worrisome. When the market sells off on heavy volume then rallies back on lighter trade it is a sign that stocks are under distribution. We need to see the major averages hold their 50dma’s and move higher on strong volume. Similar action in the leaders index is needed. We have also seen much wider and looser action in both the major averages and the leaders index. This type of change in personality is often associated with a change in direction. I have almost given up trying to figure out what this market is going to do in the short run. I am in partially invested now but I am standing very close to the exits. Jerry
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