Things that make you go hmmm...

An amazing day on Wall Street. With volatility high, both the Dow and the Transports actually broke through their respective support levels to new lows around 1 p.m. Then things took a decisively bullish turn for the afternoon and the Dow shot up like a rocket from a intra-day low of 7965.42 to close at 8835.25. An astonishing 870 point rise in three hours!

Ditto the Transports. From 3312.31 to 3692.57 after 1 p.m.

Since yesterday's post concerned Dow Theory, I might point out that according to that theory market action is only valid at the close of the day. Action inside the day (or intra-day action) is meaningless. So the fact that the lows were broken before the dramatic rise means nothing in Dow Theory.

Perhaps Jack Schannep is right after all. Happy days are here again?? For the time being, we have backed away from some seriously bad market technical indicators.

The VIX remains very high, however, closing at 59.83. Which means more wild up and down swings are possible.

All this in the face of the highest jobless claims in 7 years, a reported $230 billion federal deficit, worsening financial conditions for General Motors, and a revenue warning by Intel.

Richard Russell wrote on his web site tonight: "The primary trend cannot be reversed or manipulated, a basic thesis of Dow Theory. The longer the trend is held back, the stronger the frustrated forces of the primary trend. With the Dow closing up over 500 points today, there were only 2 new highs on the NYSE and 614 new lows. Hmmm? You have to question the validity of today's rally."

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