Yesterday’s market action was very constructive and today's follow on is also a positive. The majority of the leaders snapped back convincingly yesterday and also look good today. Try to re-acquire leaders that you were shaken out of, but be careful not to chase them when they become extended. We have seen several times in this volatile rally, where big moves to the upside contained sharp reversals on the way up. It’s a good idea to position yourself for the same kind of volatility going forward.

With the market back into new high ground, we are back in a confirmed uptrend. But keep in mind that it will be several weeks before any distribution days fall off. We are currently at 6, which is an elevated level. The Big Picture Column in IBD today discusses the distribution and reviews current short interest in the market. Make sure you look at the column if you haven't.

Best Returns,

Scott O'Neil

President, MarketSmith Incorporated

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