As Impressive As Thursday’s Rally Was, What Really Has Changed?

Previous lows were reasonably tested and we rocketed higher in a preprogrammed fashion. Every trading desk, hedge fund and no doubt the government had their fingers on the buy button as soon as 8000 on the DJIA (^DJI) was breeched. It seems too pat sometimes, but that’s the way it is. So, is that it then? Hardly, but it’s a start; and maybe we’re just working off major oversold conditions we’ve outlined for weeks now.

Many bulls are betting on a typical seasonal rally and that may happen. But after that the major fear going forward is an unproductive trading range.

Volume rose dramatically and breadth didn’t seem by the data below to have reached a 90/10 day. But this is Yahoo/Finance we’re dealing with.

I value using DeMark weekly sequential indicators among other tools as a guide which can often determine trend exhaustion. Below is SPY in that configuration from our internal charts. You can see the current “9″ count from two weeks ago. What we’d expect is a reaction. That might include some sideways movement and hopefully a lessening of oversold conditions. And, all things considered we’re getting that look. It’s a factor in keeping us out of short positions and in cash at this time.

That’s all I have time for today. Let’s give the bulls a hand! This type of day has been building and clearly the troops were lined up beneath DJIA 8K mark ready to pounce.

From my perspective it must be pointed-out that we’ve had these big moves repeatedly throughout this massive move lower. This is a trust but verify market. As impressive as today was, what really has changed? Not too much. Earnings, economic conditions and consumer sentiment still reflect terrible news with nothing on the horizon indicating any change. Nevertheless the DeMark indicator outlined exists in most markets which can signal a reversal among other things.

Tomorrow (Friday) we get Retail Sales and more consumer sentiment data. If market players are still feeling jiggy then they’ll ignore and rationalize what should be bad news.

This weekend begins the G-20 meeting. A lot of rumors are circulating regarding potential outcomes including currency revaluations. The US position is weak and some may try to shove some bad medicine down this administration’s throat before a new one begins. That probably is the reason something like that won’t happen.

Have a pleasant weekend.

Disclaimer: The ETF Digest is long TBT and short TLT.

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