Market Rap

The action in the stock market today was very constructive. For starters, the pattern of one up-day, followed by one down-day was broken after a string of nine consecutive flip-flops. I know it's only 2 days, but it's a start.

Last Friday the stock market put in what's called a large-range outside day (LROD) to the upside. That could be a signal that a new uptrend is at hand. But first, we need to see some follow-thru. Investors Business Daily (IBD) describes these follow-thru days as an increase of roughly 1% or more on one of the major indexes, accompanied by an increase in volume, and occurring on the 4th-7th day after the initial start. So that means we need to be on the lookout for a follow-thru day somewhere from this Wednesday to next Monday. That would be an additional signal that the bulls are in charge.

Of course, tomorrow (5/3) is the FOMC meeting, where the Fed will almost assuredly raise interest rates again. Depending on the language they use regarding future rate hikes, the market could react in either direction. So I don't want to place too much emphasis on the next day or so, but rather if stocks can rally again later in the week.