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2006-06-22 :: Now That's a Rally!

Yesterday was the sort of rally from a technical standpoint from which recoveries are born.  It was strong, it was broad, and it was based upon the fundamentals of good earnings reports.  That is the sort of thing I like to see.

Advancing stocks were 3 to 1  over declining stocks, something we haven’t seen in a while.  Volume was up on both the NYSE and NASDAQ, although still at moderate levels.  A very broad rally. A total of 430 stocks in the S&P 500 were higher on the day, along with 27 of the 30 stocks in the Dow. None of the 41 indexes Market Dispatches tracks were lower on the day. Among the big winners on the day: gold, steel, oil services, housing, transportation stocks and chips.

Today will be important.  If we simply retreat and take down all yesterday’s gains, then this isn’t the rally we’ve been looking for.  If we are up today, and the buyers aren’t scared off by the sellers, then this could be the inflection point we’ve been looking for.  A couple weeks ago, I wrote about a day that looked like we’d hit a bottom in the decline.  So far, that was the bottom.  I’ve also been writing about the fact that we’d need to bounce along the bottom, up and down, until we hit an inflection point that begins the march higher.  Maybe yesterday was it.

We continue to exectute the strategy discussed in Monday’s entry.  If this is the inflection point, these purchases will look pretty smart in the months to come, and particularly one- and five-years from now.

More later!

Mark