Following this morning's commentary we were looking for the indices to "push through their still resistive 30 and 50 (on the Dow) moving averages...Once those averages are surpassed, significant automated buying kicks in, and a renewed intermediate up trend can grow some legs." After the Dow blasted through those moving averages to trade at about 8500 within 30 minutes after the opening bell, the market never looked back, closing at 8616.21.
But let's go back to last week. In the commentary for both Thursday and Friday Steve took a slightly bearish posture, stressing that the moving averages were providing stiff resistance. However, he indicated we would see the intermediate weakness ending when the market broke above the 5-day moving average. On Monday he also emphasized that continued weakness was "not a given, because the Dow's long-term cycle is still rising" and the intermediate cycle was deep in the reversal zone.
In Friday afternoon trading on our 30-minute chart of the Dow we had a nice bullish crossover with the market trading above 8120. It was a good time to be long in a short-term trade and the market advanced another 25 points through the closing bell. Much to our pleasure, that signal has not reversed, indicating we should be on the long side of the market through this 500-point move.
If you missed that signal, you had another good shot on Monday. On the daily chart of the Dow the market pushed through the 5-day moving average, which had been so unyielding, above 8200. That signal got you into a 400-point move.
If you missed that one, too, be patient. We don't chase profits. Short-term and momentum cycle dips are good re-entry points for getting into a rally that you missed the first time. And remember we can make money in both directions.
(While the NASDAQ and Dow have each been up approximately 5.7% during the time we are discussing, the QLD is up almost 11.4% and the DDM is up about 12%.)
Is this the start of a bullish intermediate cycle? Steve says,"[F]or now, what we are seeing could be considered a short term cycle rally with the POTENTIAL to turn into a full intermediate advance but we want volume to confirm as well."
So far, so good. Stay tuned.
