Traders entered the day with members of the G20 stating they would continue to flood the economy with cash.  Commodities, especially precious metals took charge leading out of the gate.  Throughout the day buying picked up pushing stocks higher, but it was at the end of the day when volume poured in.  It is known many institutions do their “work” at the first and last 30 minutes of the trading day.  It certainly showed at the end of the day when volume POURED in.  We were looking at volume coming in 3-5% higher than Friday, but the last 30 minutes pushed volume figures much higher.  Monday gave the market a follow-through day, which we’ll respect.

A follow-through day doesn’t mean you simply buy any old stock.  It simply gives us a better probability of harnessing gains.  Just buying for the sake of buying may or may not work, what we want to do is put the probability of a stock going higher in our favor.  Therefore, studying the past gives us the ability to harness those stocks which give us the highest probability of moving.

Breadth has been steadily improving and today showed a nice gain with almost a 5 to 1 advantage on the NYSE and better than 2 to 1 on the NASDAQ.  This is the type of breadth you would want to see with the market moving higher.  Given we have moved quiet a bit it would be prudent for this market to take another day or two and rest.  Consolidating a nice move along with a fresh follow-through day will give our charts time to take a breathier.  It is healthy action, but what would be the icing on the cake would be a second follow-through day with much more juice than today’s follow-through.

Like July when the market witnesses two follow through days within a few days of each other it tends to produce better than average gains.  In July, we saw the NASDAQ move 200 points within a couple of weeks and we saw stocks move quite nicely during that time period.

The action we do not want to see if we want this market to continue to rally is any high volume reversal days like we say in the latter half of October.  This would be a sign of stalling and would indicate this market just doesn’t have the muster to move higher.  We simply can not afford any high volume reversals and it would indicate this market may go down in a hurry.

The one thing we are avoiding is fighting the trend.  We have a follow-through day but it is a license to open up the wallet and enjoy a spending spree.  Stick with the leaders of the market and those showing the characteristics of past big winners.

Go get ’em