IBD said tonight that Wednesday’s rally was a follow-through day on a new market up-trend. William O’Neil, publisher of IBD and successful trader, has written that all market bottoms come after a follow-through day. However, not all follow-through days succeed. According to my criteria, we are a long way from a change in trend. Yes, we got a bounce from a very oversold condition, with the stochastic on the major index ETF’s near zero. We will just have to wait to see if this rally has legs. For now, Wednesday was the 8th day of the current QQQQ short term down-trend. The GMI remains at zero, but the more sensitive GMI-R moved up to one.
I may be wrong, but today I moved the rest of my university pension funds from mutual funds to a money market fund. I was hoping for a rally that would allow me to sell out at a higher level, and seized the opportunity today. If I am wrong and the major indexes resume an up-trend, I will move back into stocks, but it will take a strong up-trend and a GMI reading above 4 to convince me. Take a look at the bearish signal in the weekly chart of the QQQQ below (click on chart to enlarge), where the 10 week average (blue) is crossing below the 30 week average (red). In an up-trend the reverse happens.
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