WEBVTT 00:00:06.100 --> 00:00:09.200 Now in our last episode, we discussed the market conditions 00:00:09.200 --> 00:00:13.300 that led IBD to get cautious in late February before the stock 00:00:13.300 --> 00:00:16.600 market sell-off began and before it turned into a full-on 00:00:16.600 --> 00:00:19.600 crash. Today. We're going to walk you through the technicals 00:00:19.600 --> 00:00:22.800 that we always look at during market corrections that signal 00:00:22.800 --> 00:00:25.800 an improving investing environment, which we're now starting to 00:00:25.800 --> 00:00:28.300 see in this market that's in rally mode. 00:00:28.300 --> 00:00:32.300 So first just a reminder that when a market is in a correction, 00:00:32.300 --> 00:00:36.300 that's not the time to aggressively buy stocks and try to guess 00:00:36.300 --> 00:00:38.000 where the bottom is. Instead 00:00:38.000 --> 00:00:40.900 you want to protect your portfolio, be on the sidelines 00:00:40.900 --> 00:00:43.200 and wait for a new market uptrend. 00:00:43.200 --> 00:00:46.700 That means that during corrections, investors should be updating 00:00:46.700 --> 00:00:48.700 their watch list with top notch stocks 00:00:48.700 --> 00:00:52.200 that are setting up, and be ready to dip their toes back in the 00:00:52.200 --> 00:00:54.900 market waters once we see what we call a follow-through 00:00:54.900 --> 00:00:59.100 day. Now, IBD's research shows that every new market uptrend 00:00:59.100 --> 00:01:00.900 begins with one of these follow-through days. 00:01:00.900 --> 00:01:04.000 And in order to find a follow-through day you first need to 00:01:04.000 --> 00:01:05.700 see a stock market rally attempt. 00:01:06.100 --> 00:01:09.300 So let's take a look at a chart of the S&P 500 to see 00:01:09.300 --> 00:01:13.900 this concept In action. Now day 1 of an attempted rally begins 00:01:13.900 --> 00:01:17.900 when at least one of the major indexes closes up from the previous 00:01:17.900 --> 00:01:23.500 session, or the S&P 500 current rally that day was here on March 00:01:23.500 --> 00:01:28.400 24th. Day one can also be what's called a pink rally day, and this 00:01:28.400 --> 00:01:31.900 happened on March 23rd for the NASDAQ when we saw a close 00:01:31.900 --> 00:01:35.600 down on the day but in the upper half of the bar, and the 00:01:35.600 --> 00:01:39.200 rally will continue as long as the absolute low or that index 00:01:39.200 --> 00:01:42.900 holds. Also key to note here is that you don't want to buy on 00:01:42.900 --> 00:01:46.600 this first day of the rally; instead you observe and wait for 00:01:46.600 --> 00:01:50.400 a follow-through day, which is at a minimum of three days after 00:01:50.400 --> 00:01:53.900 this initial rally day, and it's marked by a gain of at least 00:01:53.900 --> 00:01:59.900 1.25% in volume; heavier than the previous session and building 00:01:59.900 --> 00:02:01.000 back to the S&P 500. 00:02:01.000 --> 00:02:04.700 We saw a follow-through day on April 2nd when there was a 00:02:04.700 --> 00:02:05.900 solid price gain and 00:02:06.100 --> 00:02:09.400 higher volume on the New York Stock Exchange that prompted 00:02:09.400 --> 00:02:13.300 IBD to upgrade market conditions to "market in confirmed 00:02:13.300 --> 00:02:17.100 uptrend," but we noted that this follow-through day came with caveats. 00:02:17.100 --> 00:02:21.700 All the top percentage gainers for the S&P 500 that day came 00:02:21.700 --> 00:02:25.500 from the beaten down oil and gas industry, typically in the early 00:02:25.500 --> 00:02:26.800 stages of a new bull market. 00:02:26.800 --> 00:02:30.000 The strongest leadership comes from stocks breaking out of well- 00:02:30.000 --> 00:02:33.100 formed bases, not stocks near 52-week lows. 00:02:33.100 --> 00:02:36.200 But then if we fast forward to April 6th, 00:02:36.200 --> 00:02:40.400 we saw a compelling follow-through day for the NASDAQ with a huge 00:02:40.400 --> 00:02:43.500 gain, and heavier volume. It was bullish for the tech-heavy 00:02:43.500 --> 00:02:46.900 index to retake is 21-day exponential moving average. 00:02:46.900 --> 00:02:48.900 That's the green line here. 00:02:48.900 --> 00:02:52.800 It was also encouraging to have a close above the intraday 00:02:52.800 --> 00:02:57.200 high, set on March 31st here. It would be ideal to see the NASDAQ 00:02:57.200 --> 00:03:00.400 hold both of these levels moving forward; now, 00:03:00.400 --> 00:03:03.800 even though we are in a confirmed uptrend this market still 00:03:03.800 --> 00:03:05.900 has to prove itself. Breakouts 00:03:06.000 --> 00:03:09.300 are still in relatively short supply, and the major indexes 00:03:09.300 --> 00:03:13.100 remain well below their 50-day and 200-day moving averages. 00:03:13.100 --> 00:03:17.200 Also, after a vertical violation, which is what that extremely 00:03:17.200 --> 00:03:20.500 sharp sell-off we saw was, our research tells us that the first 00:03:20.500 --> 00:03:23.500 follow-through day has a higher chance of failing; meaning 00:03:23.500 --> 00:03:26.400 it's important for investors to remain very vigilant. 00:03:26.400 --> 00:03:29.400 So make sure that when you're buying stocks cautiously 00:03:29.400 --> 00:03:33.500 out of proper setups, you are watching them closely and following 00:03:33.500 --> 00:03:34.600 IBD sell rules. 00:03:34.600 --> 00:03:39.000 Remember this is still a very volatile market but IBD's experts 00:03:39.000 --> 00:03:42.500 are tracking and analyzing current conditions each and every 00:03:42.500 --> 00:03:45.300 day. So make sure you continue to check investors.com 00:03:45.300 --> 00:03:48.300 for the most up-to-date market insights.