Is This The One Day?

Random Thoughts

Years ago, when my smoking hot wife and I would tell our daughter that we were all going to do something fun in 2 days, my daughter  would ask “Is this the one day?”

Well, as I preach when a market is not too far away from new highs, one or two big up days can make all the difference in the world.

So is this the one day? Yes.

The Ps probed support to comfort the bears and then mounted the mother of all rallies to close at all-time highs. For those keeping score, this one day range encapsulated the entire trading range for the prior month and then some. Wow. For the day, it tacked on over 1 ½%.

The Quack also probed short-term support to suck in some bears before mounting the mother-of-all reversals. This action has it closing at multi-year highs. Net net, it wasn’t nearly as impressive as the Ps but 1% plus in one day is nothing to sneeze at.

Although the rally was broad based—e.g. the Rusty ended up over 1 1/3%—it felt like it was mostly a big cap affair. I suppose this isn’t a shocker when you look at the Dow. Those 30 big fat stocks managed to tack on average of nearly 2%.

So, it’s the “one day?” Again, Yes. Now what?

Okay,

<Insert Follow Through Speech>

As I preach, follow through is key. In fact, see yesterday’s column “The Key To The Markets.”

Yes, the market had its one day. Hopefully, we soon won’t have to wonder if this is a one-day wonder. The news is out. The shorts have been squeezed. It’s what happens next that’s important.

Follow through is key-stop me if you’ve heard that before.

<End Follow Through Speech>

So what do we do? With the market trading in a range and now probing new highs, there’s not much setting up. As a pullback player, I need a trend—one day is not enough—and then a pullback. Honor your stops on any leftover longs and keep those momentum list handy. On follow through and a pullback, we’ll have a plethora of new opportunities. And, if the market comes right back in, we’ll sit on our hands. While waiting for things to shake out, honor your stops on any leftover shorts and take partial profits if offered/trail stops on existing longs.
Futures are flat to soft pre-market. Pretty amazing huh? We have the mother-of-all up days and then the next day, the market begins with a shoulder shrug.

Best of luck with your trading today!

Dave

P.S. Come to the chart show today! This will be the last one of the year.

No columns on Monday and Tuesday.