After Tuesday’s reversal, the Composite continued higher to gain 1.3% for the day.  The index closed at 99.89% of its daily range, which tells us that buyers were strong into the close. The Arms index confirmed this with a reading of .5522 on relatively light volume, as I suspected it would be going into the long Easter Weekend.

I was surprised by the volume on Tuesday which was high at 2.2 billion shares. After looking at the intraday charts yesterday, I saw that much of the volume was selling volume as fear took over when the Composite was falling to near lows of the day around 3950.  The chart immediately below is the NASDAQ 100 futures, and you can clearly see that most of the volume was to the downside in this 5 minute chart.  By the end of the day, the /NQ futures had recovered completely, and the Bulls had rejected the close below 4000 on the NASDAQ.  After the shakeout, relative steady volume drove the futures back to near the high of the day.

Yesterday opened with an opening gap on the Composite, but then the index traded down to fill the gap, only to reverse to close near its high as buyers gained confidence. The Force Index numbers in the industry groups jumped dramatically higher yesterday as the Bulls regained control in the short term.  This type of market action cannot be ignored.  We get into trouble in this business when we form an opinion and don’t see what the market is telling us.  In the short term, it is telling me that it wants to go higher. Read Full Report