Looking at the market, the major averages closed with modest gains on Wednesday as the major averages consolidate their recent move. As long as February 5th lows are not breached the window remains open for a new follow-through day (FTD) to emerge. A new follow-through day will confirm the current rally attempt and will be produced when one of the major averages rallies at least +1.7% on higher volume than the prior session as a new batch of leaders breakout of sound bases. However, if the February 5, 2010 lows are breached then the day count will be reset and a steeper correction may unfold.
It is also important to see how the major averages react to their respective 50-day moving average (DMA) lines which were support and are now acting as resistance. Until they all close above that important level the technical damage remaining on the charts is a concern. So far, the market’s reaction has been tepid at best to the latest round of economic and earnings data which remains a concern. Remember that the market remains in a correction until a new new follow-through day emerges. Until then, patience is paramount.