While a 900 plus bullish 4% breakouts in Market Monitor is significant, the backdrop to this rally attempt is different from last time where market rallied after reaching extremes of below 200 on 65 days reading intra day. The McClellan Summation Index turned last time from much extreme level than currently it is at. More than that nothing changes the reality that leading stocks have seen widespread reversal and overall market had many days of high volume distribution compared to last turn. So this bounce must be looked at against that backdrop. Seasonal forces might help put together a some sort of scratchy rally for next few weeks, but personally I have low conviction about this rally attempt. Only more sustained buying and the 65 days ratio turning green will have me becoming more optimistic.
Yesterday does not count as follow through day on IBD system, only a follow through day of 1.7% after 4 to 7 days after a rally attempt is valid breakout. The IBD Big Picture is also skeptical of this rally attempt. Unlike that last time it was screaming, buy, buy, buy during correction. The Big Picture read of the market is one of the best read I have seen on the street. It is seldom wrong in its overall readings.
From IBD Big Picture
Wednesday's price gain was one of the biggest of the year for the Nasdaq, an encouraging sign. But one big day doesn't mean much in the grander scheme. The Nasdaq's nine biggest up days of all time all occurred during the bear market of 2000 to 2003.
More recently, the Nasdaq's biggest up day of this year came on Nov. 13 — right before the market started a new leg down.
For now, consider Wednesday to be Day 2 of a rally attempt by the major indexes. We'll need to see more signs of strength among both the broad indexes and leading stocks before the market can take on a more bullish hue.
What it means in my scheme of things is light commitments and very low 5 to 10% profit targets on all methods.