Today is not a follow-through rally confirmation yet
Per IBD’s definition, “A follow-through happens when one or more of the major market indexes clocks a big gain in higher volume than the previous session.”
So far, major index’s volumes have not exceeded the previous session yet. Price wise, Dow looks like to close today around 12,260, 8 points below the close on Feb 28, 2007. IXIC to close around 2387, lower than Feb 28’s close of 2416, and SPX to close around 1401, 5 points below Feb 28’s close.
So, bulls still have many tough battles to fight, and tomorrow will be one of them.
Today, like Mar 06, is a 2nd new rally attempt, with Mar 06 being the Day 1, or the 1st new rally attempt, with “Day1 is defined as any session during a correction in which one of the major indexes closes higher after hitting a low”, according to IBD.
Mar 06 is a short squeeze day, according IBD.
“The put-call volume ratio, which tracks the number of bearish puts vs. bullish calls traded, has spiked sharply. The ratio zoomed to 1.49 Feb. 27, the day the major indexes plunged and set off the correction. It's hit 1.09, 1.24, 1.22 and 1.38 since then.
With the put-call ratio reflecting extreme bearishness, it's possible that Tuesday's big snapback in lower volume was a short squeeze. Short sellers (the stock-market equivalent of put buyers) saw the market rebounding and may have bought shares to close their positions, which caused the market to rise even more and spur additional short covering. That would help explain the day's sizable gains on anemic volume.”
Today, like Mar 06, looks like another short squeeze day, with put/call ratios dropping below 1 all day long. So, some bears already started taking money off the table.
“The question then becomes, where do stocks go from here? No matter how bad the market looks at any given time, there will always be some kind of bounce back — just as even the most dazzling rally will inevitably see some pullbacks. But the market needs strong volume to back up big price gains.”
“Following Day 1 of a new rally try, you're looking for a follow-through rally confirmation to occur on Day 4 or later.”
“The market's action on days 2 and 3 of a rally attempt (in this case Wednesday and Thursday) are less important. But a single distribution day of declines in heavier volume is often enough to derail the rally attempt.”
IBD’s TA is data-driven, and history often repeats itself, providing a playbook for future events.
The following is some of my trading notes for today.
Today’s market really looks wield, for the lacking of volatility, or lack of any counter offenses from bears, making me shy from placing more trades.
So, what’s up? Are bulls so confident that tomorrow’s payroll number matters no more? Or the bulls are squeezing the bears as much as possible before tomorrow’s number? Bulls are still restrained in terms of not going too far above 12300.
For bears, they have to break this tight horizontal channel, and they did at about 2:37ET, pushing Dow down as much as 12220, passing 12260 which is today’s opening point, and kind of closed half of today’s opening gap. Good job, traders! Bulls closed the gap quickly and now Dow is just about where it opened today. I squeezed in a small trade in between.
From marketreflections.com
Financial market is a dark universe full of uncertainties. Rational is light, when it dims, emotion comes in.
Fundamental analysis: it is not about what and how you think, it is all about what and how market thinks.
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Technical analysis: in short term, there are no fundamentals; in long term, we are all going to die./>
