Big Reversal

I wrote this morning I’d be looking for the market to shake off bad news and go up anyways.  There was talk it had been doing this but this would be a good test.  A horrible jobs report that shows almost a million people losing their jobs in the past couple of months.  No shock we gapped down as I said we would at the open.  It was the market’s response to that gap down that would be the test.  One for the bulls.  It passed the test in a big way erasing a 250 point loss and turning it into a 250 point gain.  Very nice.  

The market has to prove itself.  You recall I wrote this several times in the past.  Proving itself means breaking through moving averages, showing some durations to rallies, and having increasing volume.  One day doesn’t make a market but this was a good hurdle to jump over.  I don’t think it necessarily changes anything except perhaps set us up for a longer rally.  The volume was average and it wasn’t a 90% upside volume day and the internals were okay.  But, it took really bad news and ignored it at the end of the day.  Nothing wrong with that at all.

One note.  Take a look at the 30-day moving average on the various indices (especially the S&P 500).  I wrote about the 21-day moving average in the past few days but the 30-day is very interesting.  You can see signs of stabilization but not turning up yet and we haven’t gone above it.  Let’s see if Monday can take us to a new level.  I made no moves today and will wait for the market as I said to prove itself.

Have a nice weekend.

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December 2008
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