Stock Market Getting Better

After a series of distribution days all major indices finally gave us an up day. An what an up day that was, a more than 2,2% gain on Nasdaq. However, before madly rushing in again, we should exercise some caution. First, markets tend to be more volatile lately, so a 2% up day is not as execptional as it seems on the first glance. Second, volume was not exactly breathtaking. It can be considered as accumulation day, but we'll have to see much more of these, before a sustained rally can be initiated. And third, markets will have to hold on to these gains. A distribution day soon after accumulation would probably mean the rally will fail.

In the past I noticed that ascending channels on my SMI indicator often precede a sustained rally we are waiting for. Such a rally would exhibit a positive momentum day after day for several weeks without any major distribution. The present ascending channel suggests such a move is possible. We'll see how it goes this time.