Deal With The Present

The world did not change over the last week. Many companies are pre-reporting poor numbers and outlooks. All the talk is about recession, war and  terrorism. Layoffs continue at an amazing pace. The list goes on and on.

There is one very important change that has happened...that is the action in the market. I have said numerous times during past reports that you can't hide institutional selling. Well, you can't hide institutional buying either. I am not one of these geniuses that can guess whether this is the start of a new bull. I have no idea how far it goes and certainly no idea how long it lasts. I do know that the Dow, S&P 500 and now the Nasdaq have all had follow-through days...and  Wednesday's volume was especially powerful and cannot be ignored.

But, as always, there remain things to think about:

1. Looking at long-term charts, this is still a rally in a longer-term downtrend.
2. There remains a small list of breakouts. As I have stated, I expect any rally would be led by those stocks that have been hit the hardest...especially in Tech Land. Most are way below their moving averages and have a lot of work to be done.
3. Resistance is straight ahead. You are right in that area for the Dow in the 9100-9300 range...the S&P 500 between 1080-1100 ... the Nasdaq has to still fill the gap from the Sept. 11 event.
4. Most importantly, please remember the symptoms of bear market rallies. They are sharp, make you feel good, suck you in, and end very quickly. Let's hope for all the longs out there that this time finally is different than other fake outs.

Getting back to the volume, I have always put a great emphasis on extreme volume days, so I ask you not to fight what has occurred...and I ask you to watch your short positions carefully, if you still have some. I know a lot of us have been conditioned to be bearish because of the horrid action in the markets over the past 18 months. Don't let the past sway you. Deal with the present and nothing else.

I am going to let the market dictate to me. If this does have legs, expect more and more names to hit the New High List, which is my favorite. I believe odds do favor upside testing here. Heavy volume days usually lend themselves to more follow-through.

Keep in mind, this action  can abort at any time. That is why it is so important to watch the major indices every day for significant changes.