The major averages were up nicely on higher volume with the NASDAQ Composite up well over its threshold level of 1.3%, which is to be considered a follow-through day even though it came on day 3 of the attempted rally. This is because two rare rules have been invoked in these unusual times. First, when the NASDAQ Composite moves higher 3 days on a row on increasing volume, one can take the third day as a follow through day. Second, the NASDAQ Composite did not fall more than 6% from its peak thus any day that trades higher and meets the threshold level, 1.3% at present, meets the requirements for a follow-through day. These rules have been invoked with statistical success but nevertheless are rare. The Market Direction Model (MDM) correctly went to a buy signal shortly after yesterday's open, ahead of the follow-through day confirmation, due to Japan's aggressive quantitative easing action and a continuation of QE on full tilt by other central banks. MDM is about the odds, and in these unusual times, it accounts for the effects of QE as it has since 2009. Odds are the markets will continue to baby step higher, though leaders continue to stumble and junk stocks outperform. Likewise, the UVXY volatility model went to a sell signal as the two models at times inversely correlate in terms of signal switches.
In this environment, leading stocks have been riskier than normal, and the strong index action over the past three days has not been accompanied by a more than a small handful of buy signals in potentially leading stocks. 3-D printing company Proto Labs (PRLB) was up nicely yesterday as it broke out of a roughly two-month base joining its group cohort Stratasys (SSYS) which had a pocket pivot on the prior day. 3-D Systems (DDD) also made a strong move yesterday but from a position below its 50-day moving average, while Exone Company (XONE) made a sharp v-shaped moved to all-time highs. The strength in the group was due to positive analyst comments as well as a Wall Street Journal article that mentioned applications of 3-D printing technology in the medical industry.