Happy Thanksgiving!

The rally continued today but the advance occurred on lighter volume. Given the holiday, that may or may not be meaningful. It is beginning to look like the rally is close to completing 3 waves up from last week's low. This could be a part of a larger upward corrective rally at the beginning of wave (4) or it could be a countertrend rally in the continuing decline. As mentioned before, we will need to see the quality of the next decline to determine the most probable outcome. Fibonacci resistance is dead ahead at the .618 retracement from the 11/4 high at 8812 in the Dow and 30.59 in the Qs. Beyond that the next major resistance is the 50dema. This will be the first test of the 50dema since the August highs and will likely be a least a short term sell.

According to my understanding of IBDs rules, today's rally did not qualify as a follow-through day. Due to the declining volume I have not taken a long position in the indexes. Perhaps Friday's reversal was enough of a signal, but there were not enough indications for me to justify it at the time. Should we see a pullback on lighter volume or a retest of last week's lows, I will be taking a position with an initial target of the 50dema. If that level is surpassed, the 200dema is not out of the question. The typical seasonal pattern suggests we may see some sort of pullback next week.

I continue to suspect that trading over the next few weeks will be the most difficult trading environment that we have seen in several years. We are not likely to see sustained trends on the daily and weekly charts, which will cause a great many whipsaws for traders. Caution and protection of capital are most important at this time. There is no point is giving back gains from the extraordinary decline that we have just experienced by unproductive trading in a choppy market. Smaller positions should be considered. If a larger intermediate untrend is about to unfold there will be time to get on board, but for now there are few indications that could be the case. For now the monthly and weekly trends are still down and the trades should be weighted in that direction. We can begin to alter that view once the high of the low month has been cleared on volume. For the Qs that is 34.01 and for the Dow it is 9653.95.

Again, the action next week will give us important information to evaluate the strength of this rally.

Have a Happy Thanksgiving and enjoy the time off.