Gary Kaltbaum is an investment advisor with
over 18 years experience, and a Fox News Channel Business Contributor. Gary
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Before Tuesday's action, the market experienced four negative
reversal days where the market gapped up on "good news" and failed. The fifth
time was the charm. We would suggest that many became too comfortable with the
"sell the big open" leading to Tuesday's rally. A poor job's report couldn't do
it. The FED pausing couldn't do it. Cisco's (CSCO | Quote | Chart | News | PowerRating) earnings couldn't do it.
The cease fire couldn't do it. A supposed good number on inflation did the
trick.
"The Nasdaq had its second follow through day since the market topped in early
May. The last follow through day came very late...on day 12. Good follow through
days usually occur on days 4-7 off the lows. Tuesday's follow-through occurred
on Day 21 of its rally try. This is suspect...but we'll still give it a chance.
In the past, some rallies have worked even with late follow-throughs. We are
also less than thrilled that volume came in lower than average though volume
came in better than the day before.
That leads us to our canned line: Every bull market has started with a
follow-through. But not every follow-through has led to a bull market. And yes,
June's follow-through day failed miserably. The bear market of 00-03 had many
failures.
We would not go out and buy with abandon. If this is the start of something big,
leadership will show up. Start gathering a list of stocks that bucked the trend
of the past three months and look for high volume breakouts.
Other technical notes:
As you know, we are big believers that the NASDAQ-types lead both up and down.
It was the NASDAQ breakdown that made us call a top for the market on May 11. It
is nothing but a positive that for this second, the NASDAQ-types are starting to
outperform. Both the NASDAQ and NDX did move above their respective declining
50-day
moving averages
for the first time since the top. Of course, you can say the same thing for the
all-important SOX.
The lagging small and mid-cap indices have held their recent lows. This also is
a good start...but will need to see better action out of them.
The Dow and S&P are again nudging up against resistance...in fact, some strong
resistance. It should get interesting with any move up from here.
