Stocks notched gains Thursday, But…

Just time for a quick summary today. IBD said it best:

Volume fell significantly, making the indexes’ gains less impressive. Still, we note that Wednesday’s activity was very high, and thus a tough comparison.

Also disappointing was the rally’s depth: Gainers beat losers by 5-to-3 on the NYSE and on the Nasdaq by not quite 4-to-3.

Those results don’t paint an exciting reversal.

The stock market remains in a downtrend. Headlines and rumors of headlines knock around the indexes day to day and sometimes hour to hour. Stocks tumbled almost unopposed for more than three weeks. It was only a matter of time before a rebound of some sort would take hold.

It’s too soon to know whether this attempted rally has legs. Even if it does persist, almost no stocks are showing the kind of technical and fundamental strength you want in a potential leader. It may take weeks or months before institutional-quality stocks set up in sound price bases. Until then, your best returns will probably come from studying past trades, righting unprofitable habits and building discriminating watch lists for the eventual upturn.

My 2-cents is that there’s a strong probability this rally fails before closing above the 200-day moving averages, if not sooner.

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