$SPY Is The Sell Off Over?
The above chart is a daily candle chart of the S&P 500 represented by SPY. The red arcing area is a distribution phase. The yellow highlighted area seems to be an area of indecision with both pockets of support and resistance. With in this area there's a possible "follow through day". Which, as described by Famed Technician William O'Neill is:
"A follow-through day occurs during a market correction when a major index closes significantly higher than the previous day, and in greater volume. It happens Day 4 or later of an attempted rally. Leading up to a follow-through day, an attempted rally takes place during a downtrend when a major index closes with a gain. The rally attempt continues intact as long as the index doesn't make a new low. Follow-through day variables include: an index closing sufficiently above 1% on increased volume, positive behavior of leading stocks, and improved market action regarding support vs. resistance levels. The most powerful follow-through days often happen Day 4 through Day 7 of an attempted rally. In the wake of a follow-through day, the market should continue to add gains in strong volume, with breakouts by top stocks. This is further confirmation a new uptrend is underway."
Do we fit the criteria of a follow through day?
1) Did we have a market correction?
Peak-to-trough was a roughly 12% drop.
2) Was there an attempted rally?
January 24th saw a 4% plus drop only to close higher on the day. That low has proven to be the low of the sell off thus far.
3) Was there a higher close on strong volume on day 4 or later?
On the fourth day, the index closed 2.5% higher then the previous days close on stronger volume.
4) Did the rally continue on strong volume?
Today, the fifth day, saw the index rally back above the 200 Day Moving Average for a nearly 2% gain and on above average volume.
5) Did leading stocks breakout?
The rally was lead by tech stocks and with in the group semi's such as NVDA and AMD lead the way.
The argument for a follow through day seems pretty persuasive.
What does the community think? Too soon?
"A follow-through day occurs during a market correction when a major index closes significantly higher than the previous day, and in greater volume. It happens Day 4 or later of an attempted rally. Leading up to a follow-through day, an attempted rally takes place during a downtrend when a major index closes with a gain. The rally attempt continues intact as long as the index doesn't make a new low. Follow-through day variables include: an index closing sufficiently above 1% on increased volume, positive behavior of leading stocks, and improved market action regarding support vs. resistance levels. The most powerful follow-through days often happen Day 4 through Day 7 of an attempted rally. In the wake of a follow-through day, the market should continue to add gains in strong volume, with breakouts by top stocks. This is further confirmation a new uptrend is underway."
Do we fit the criteria of a follow through day?
1) Did we have a market correction?
Peak-to-trough was a roughly 12% drop.
2) Was there an attempted rally?
January 24th saw a 4% plus drop only to close higher on the day. That low has proven to be the low of the sell off thus far.
3) Was there a higher close on strong volume on day 4 or later?
On the fourth day, the index closed 2.5% higher then the previous days close on stronger volume.
4) Did the rally continue on strong volume?
Today, the fifth day, saw the index rally back above the 200 Day Moving Average for a nearly 2% gain and on above average volume.
5) Did leading stocks breakout?
The rally was lead by tech stocks and with in the group semi's such as NVDA and AMD lead the way.
The argument for a follow through day seems pretty persuasive.
What does the community think? Too soon?
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