Late day selling put a damper on the day’s action as volume jumps. Institutions appeared they were avoiding from jumping into the market as volume ran lower on the NASDAQ for much of the first hour and a half. Volume ran flat on NYSE, but comparing to Monday’s ultra-low volume it wasn’t saying much for the market. The morning’s gap move was quickly sold and appeared the day’s gains were about to evaporate. As the lunch hour approached volume and price action began to surge. Both price and volume were surging as institutions stepped up and bought stock. Late day selling took the bite out of the morning buying spree.
Day three of our current rally attempt certainly provided us with some entertainment. The key thing to note is the overwhelming volume support we have seen on day one and two at intraday lows. Last Friday we saw volume surge just after lunchtime. Today, we saw a similar volume surge just before lunch and maintained through to the close. It has been quite some time since we’ve seen a volume surge like we’ve seen last Friday and today.
Remember, no rally has ever started without a follow-through day. Another reminder is we continue to have every major index under heavy distribution. Normally, sustained rallies have the major indexes with much more accumulation. The 2009 rally has been an exception to this rule. At any rate, if a follow-through day occurs Wednesday through Friday it will confirm the new uptrend. If we see a second follow-through day before day 10 of a rally it is a clear indication the uptrend is very strong. Until then, keep it cool and do not try to anticipate.
Tuesday’s rally did go a long way in lifting the market from deeply oversold conditions. However, oversold conditions remain and this market will either need to work sideways or move higher to work off the current conditions. If we fail to get a follow-through day it will only aide in better short setups.
Big Wave Traders will be ready for anything this market produces. We are already prepared with early long and short setups and will act upon these as the market dictates. The question is are you ready?
