FOLLOW THROUGH DAY

All nasty market correction eventually ends and after comes the rebounce. This pattern is widely known as a chart sign that identifies market bottoms. Every major bull market rally begins with “Follow-Through Day" and is a tool used by traders to identify market bottoms. The pattern starts as the market falls by some percentage; the SP500 dropped more than 9% in the last couple of weeks. On a Day 1 the market closes higher, Day 2 and Day 3 cannot be lower than the Day 1 and comes the Day 4, which is the “Follow-Through Day". On Day 4, 1% or more gain is an appropriate. Yesterday Sp500 gained 1.94%.

On Tuesday the Nasdaq registered its fourth consecutive gaining day and its best one-day advance in more than 20 months. The SP500 benchmark index rose for the fourth straight day and best one-day gain this year. On the other side, the last 3 days have seen VIX drop 12.74%, 15.55%, and 13.4%. This fear index has never dropped more than 10% for 3 days is a row.

All in all yesterday was a real “Follow-Through Day", no doubt. Follow-throughs typically emerge on the fourth, fifth, sixth or seventh day of a new rally. So we are expecting more gains this week further till Friday. In our forecast we see the SP500 at 1.970 pretty shortly again.

The BFM Assets Team.