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Tuesday, June 15, 2010

All Indexes Follow Through

Unlike last month, today we had an O'Neil follow through day on all 4 indexes IBD tracks for that purpose (SPX, Nasdaq, NYSE composite, and DJIA). Volume was not hugely impressive, but greater than yesterday, and the percentage gain was more than enough to qualify. It appeared that today was going to be copy of yesterday, with another morning rally and a failure at 1105, but this time we didn't fail, and once 1105 gave way it was melt up time.

The Nasdaq again lead the way, and volume here really doesn't look bad at all. # days ago we had a bullish crossover in MACD, and today put an exclamation point on it. 2% is generally considered the threshold for a follow through, and today beat that easily.  Today I put up the simple 50 and 200 day averages, which now seem to be the ones traders are keying on. We are in between the 50 and 200, with the 50 threatening to put up some resistance..

Giving impetus to the follow through was a big move in the SOX, the semiconductor index, which got through it's 50dma today with ease. Price doesn't do this chart justice; look at the price relative line, now at a new high.

Also making a move was crude oil, which is now at a critical resistance point. I think it may be dawning on traders that the lack of off shore drilling is going to send supply down, not up.

Of course, the strengthening Euro will also send oil up. I saw this chart right after the close. The candles are the EUR/USD pair, the red line is the DJIA. Tick for tick.Unlike previous days, the Euro did not do a late swan dive, and neither did the market.

Well, we start a new "confirmed rally", which means I will be sending out some more scouts. The last batch I sent out came back with arrows in their back sides. This follow through, having occured on four indexes simultaneously, probably has better chance of success, but we are in a period of seasonal weakness. We also have a potential head and shoulders pattern developing, with the right shoulder in the formative stage right now. So, short term I'm bullish, long term it's wait and see.

I will have the new highs update shortly.

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