Zeev's Turnips Patch-No Politics (ZEEV)

[lemming]

The signal for "rally mode" is as follows:

Rally day 1 is the first up day after a breakdown.

Look for follow-through (1%+ advance on index with rising volume) on days 4-7 to confirm the rally. Days 1-3 are typically not reliable for follow-through (typical example was 4/22 last week). Also, I think that IBD may have recently raised the requirement for follow-through to a 2% rise during the go-go days of 2000. However, I still use the original rule.

Follow-through much later than day 7 is tradeable, but suspect. It is usually an indication of a sucker rally or a weaker, more meandering rally.

Any intraday drop below the intraday low of rally day 1 (even if the rally is already confirmed with follow-through) breaks the rally, and the rally day clock is reset.

-David