Phil's Stock Market Blog

Looking at a chart of the Nasdaq composite... Friday's action saw a large increase in volume and price moving just slightly lower. There was a lot of trading, the price didn't collapse. Which indicates there was plenty of buying interest. It still looks like a bottoming process.

Stocks are acting better. The Number of Stocks Crossing Above the 50-Day XMA has been picking up for a couple of weeks, after laying fallow for the past couple of months. But not too many stocks have crossed back above their 200-day XMAs yet.

Visited the Double Stop Fiddle Shop and took in the show Saturday night, which was excellent.

I noticed that most recent Climax Lows in the Nasdaq and DJIA (those are the symbols to use by the way) were also Follow-Through days off the previous low.

After these signals, the market proceded to spend last week pulling back moderately on contracting volume, which is a healthy sign of Accumulation. The Accumulation/Distribution indicator has swung above 50% in the DJIA, and is up to 49% in the Nasdaq.

All of this seems pretty favorable.

Last Friday I said we're bottoming out (turning around actually), and today it sill looks that way. There were Climax Low signals again in the Nasdaq and the Dow, from slightly higher levels than the last ones. It's very encouraging. Should lead to at least an intermediate-term rally. Watch for a follow-through day next week.

The Climax High signals marked the top in the Nasdaq back in May. They also caught the highs longer ago, from higher heights (you can go back and time and see them with a Pro account).

But the Climax Lows and Highs can either be short-term or long-term. In a bear market, the buy signals can lead to a rally of just a few days. Visa-versa in a bull market. There's no way to tell except in the aftermath, by watching the behavior of leading stocks.

Well maybe it's "attempting" to turn around (see below), but we're down this morning. Although there's no telling how the market will close. Climax Low signals don't have to go up right away. Often the market will retest the low of the signal. But if it penetrates the low without reversing upward then the signal has failed.

According to the work of William O'Neil, a new bull leg will be confirmed by a follow-through day upward after the absolute low has occurred. The follow-through signal is available for plotting and scanning with the Gigascanner. Note that it works best for the overall market indexes (DJIA and NASDAQ) and the largest-volume stocks, but usually doesn't work so well on individual stocks.