Despite taking out last Thursday’s low stocks were able to reverse hard and close up on tremendous volume.  We warned last night we needed this market to show some strength and we did see that today.  Last Thursday’s low was certainly a pivotal point we were watching and after plunging below it today buyers stepped up in a big way.  Leading the way was the NASDAQ 100 index closing higher by more than 2%.  The Russell 2000 and NASDAQ Composite were not too far behind.  The move today was quite impressive and while we do not have a large set of leading stocks we will be taking the market’s lead here.

Before everyone gets too excited today is day one of attempted rally per IBD rules.  We did set new lows despite reversing and closing strong.  Had Thursday’s low stayed in place today would have been a follow-through day.  What does this mean?  Not too much as if we get long signals we will get long.  The only difference will be the size in which we enter.  Position sizing is just as important as exits and if you get position sizing wrong even with exits will negatively impact your returns.

If this rally has any teeth we should see some immediate follow-through.  On October 5th, 2011 we saw this precise action take place.  A huge intraday reversal on massive volume and the market immediately followed-through.  While we have not seen a follow-through day yet if we can see this market push higher immediately would be a great sign.

Today did make a huge difference in terms of the market.  Fourth quarter seasonality, especially in a 6th year of a presidential cycle is extremely bullish.  For those of you who are bears price will always rule all.  Do not fight the trend.  Yes, if this system is to collapse you will be able to spot the change in trend well ahead of the crisis.  Stop fighting the tape and ride the Big Trends with Big Wave Trading.

Let’s see if this market can fight its way back to new highs.  Along the way we will be hunting for potential big stocks.