Bulls Retreat

The stock market bulls are in retreat. After weeks of big swings up and down, the bulls have thrown in the towel. How deep will it be? How long will it last? Of course nobody knows the answer to that question even when they claim they do. The chart below courtesy of www.bigcharts.com shows clearly how the major indexes have now broken the 50 day moving average decisively.

 

It is important to know that in a down trend we can get big up days to suck in the bargain hunters only to take the market lower. To combat against this we have to look for an odds favor condition, we call this a follow through day. While making up a list of stocks holding up well in this down trend we also have to watch for a follow through day. A follow through day is when we see a move up on volume four to ten days from a recent low. This does not guarantee a new uptrend has begun but puts odds in our favor that it may have. Remember no bull market starts without a follow through day but not all follow through days will guarantee a new bull market has begun.