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Thursday, November 29, 2007

Rally Attempt Day 3

You are going to hear from the pump monkeys that we are in a 3 day win streak, meaning the correction is over. Maybe they are right (they have to get it right occasionally, don't they?), and looking at the major indexes, it certainly looks that way. MACD is giving buy signals all over the place. That is why I'm glad I read Investor's Business Daily. In William O'Neill's discipline, the first 3 days of a rally attempt don't count, starting on day 4 we are looking for a follow through, which is a big move up on volume higher than the previous day (the precise definition is not in today's edition, but they frequently give it in their market pulse column).

Tim Knight (see the Trader Tim linnk on my links section) called yesterday's move a bear market rally, and considering the size of the move, I suspect he is right. I also look for confirmation in some of the other indexes (such as the transports). We did not get it today.

My favorite market thermometer is the Russell 2000. It also showed weakness today. It lookes like 770 is pretty serious resistance.

The financials also fell to profit taking today. It is still well within it's down trend.

Something I noticed before the market open was the steady drop in the yield on the 10 year treasury. A lot of money was going into bonds today, even though the major indexes were positive.

Watch carefully in the next few days for a follow through, if we get one I will certainly post it here. I am currently working on a list of high relative strength stocks which will likely take off if we get a follow through. I will try to post it over the weekend.

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