Editor's Note:

There is no denying the strength in stocks today. After yesterday's intraday bullish reversal the follow through rally today seems like confirmation of the turnaround. However, the larger trend is still down. I hate to say it but this seems like a bear-market rally. The trend of lower highs and lower lows remains intact. I have posted several charts of the major market indices below. The rebound is very impressive but so far it's just a bounce.

I will admit that most of the stocks I looked at today seem poised to rally higher. Of course two days ago the entire market look poised to crash. This crazy market action can be tough to trade.

I like to look at charts of the individual components of the NASDAQ-100 index and the S&P500 index. The vast majority of stocks do look short-term bullish. However, there are several high-profile names that worry me. These stocks did not truly participate in the market's rally today: UTX, MCD, GMCR, CMG, V, BRK.B, KO, PG, JNJ, PEP, WMT, AXP, and KFT.

Another concern is that stocks have moved so far so fast already. That's another characteristic of bear-market rallies. They are fast and sharp. Bear-market rallies lure investors back into the market only to reverse lower on them. Now it's certainly possible that yesterday was a major reversal day but we won't know that until much later when the trend has changed to bullish with higher lows and higher highs.

If you must buy something bullish then I would look at stocks like BIDU, INFY, and SHLD. These are all bouncing but they're not up crazy amounts today. The trick is trying to find something to trade where you can place your stop loss and not get immediately stopped out on a normal pull back.

Officially the newsletter is not adding any new trades tonight. Sometimes investors need a reminder that "cash" does qualify as a position. I know you might be afraid that you'll miss the move if you don't buy now but the market usually provides another chance if you're patient.

Chart of the S&P 500 index:

Chart of the NASDAQ Composite index:

Chart of the Dow Jones Industrial Average:

Chart of the small cap Russell 2000 index:

Chart of the Dow Jones Transportation index:

- James