A strong counter-trend bounce developed on Thursday, although momentum slowed in the afternoon, and some volatility erupted at the closing bell. Breadth was excellent, with nearly 7,000 stocks advancing and only 1,350 declining.
Most notable was that the new 12-month highs exceeded the new 12-month lows for most of the day. This is the first time in two months that we have seen this happen. I've been pointing out the declining number of new lows lately, as one of the key bullish factors that have been developing.
Another positive change was the lack of a sharp intraday bounce. We have had 37-straight sessions with an intraday drop of 1% or more. The buying today was quite steady, although the close was slightly weak.
The issue now is whether we will see some upside follow-through. The bounce on Monday was slammed due to the poor report by Snap (SNAP) , but it was an improved reaction to earnings from Nvidia (NVDA) and some retailers that helped to drive this bounce.
Four prior bounce tries this month have failed very quickly, but typically counter-trend bounces do persist for a few days and start to trigger talk that a bottom has been hit. We really don't need to decide right now if this is a bottom or a bounce. We just need to watch the price action closely and be ready to adjust as the price action changes.
I added long positions today primarily because the charts are not showing any inclination to retest lows. If we suddenly see a surge in stocks at 12-month lows again, I will be raising cash, but there are no signs of that currently.
The main thing to watch for in the days ahead are continued fear of missing out, and some "climbing the wall of worry" action. There is a lot of distrust of this market, which can help to put more pressure on the upside. We also have a three-day weekend coming up, which often produces some upbeat action on Friday.
I'm looking for more upside but will keep tight stops on positions and aggressively protect gains.
Have a good evening. I'll see you tomorrow.