indexes undercut lows, technical analysis traders' signal set-off, wonder what will happen in the next few weeks? is it a trap? smells like one though

ibd states :

Posted 11/13/2008

Stocks rebounded sharply higher Thursday, after most of the major indexes undercut their recent lows.

The Nasdaq plunged as much as 4.7% early in the session. But the technology-laden index snapped back for a 6.5% gain.

The benchmark S&P 500 also erased a big early loss, rocketing 6.9%. The Dow industrials vaulted 6.7%, the NYSE composite 7.4%

Volume spiked across the board. It jumped 37% on the NYSE side, hitting its highest total since Oct. 16. Nasdaq trading bounced 43% compared to Wednesday's level, marking its fastest pace since Oct. 23.

Stocks found their second wind after the Nasdaq, S&P 500 and NYSE composite all undercut their lows from last month.

In fact, the market likely set off a number of trade triggers, given the milestones that it hit.

The Nasdaq briefly ducked below 1500 for the first time since May 2003. The Dow again sliced through the 8000 level, just the second time it's done so since April 2003.

That 2003 marker also has significance. The broad indexes followed through on a rally in March of that year, launching a four-year bull run.

Indeed, the past few weeks have shown some signs of support just above those early 2003 levels.

Still, one big up day in higher volume, even with such a dramatic price swing, doesn't change the fact that the market remains in a correction.

On Oct. 10, the Nasdaq swung from a big loss all the way into the black. A follow-through ensued just four sessions later, as the market staged yet another big, upside reversal on Oct. 16. But that rally quickly petered out.

On Oct. 28, stocks showed more resilience, with the S&P 500 rolling up a 10.8% surge — one of the biggest in its history.

After a few more up days, that brief rally attempt also turned sour.

For growth investors, the one saving grace is the action of a handful of top-rated stocks. After some heavy losses Wednesday, a number of leaders bounced back Thursday.

Almost Family (AFAM) staged a huge reversal, rebounding from support at its 50-day moving average and powering up 5.30 to 49.65 in 2 1/2 times its normal trade. The provider of in-home nursing services briefly undercut its 42.90 buy point before bouncing back.

Ralcorp (RAH) soared 6.12, or 9%, to 71.43 in active trading.

The maker of cereals, cookies and crackers added a second day of gains following Wednesday's earnings report. That propelled Ralcorp above a 71.10 buy point in a short consolidation.

Energy stocks had a big day, as oil prices halted their recent plunge.

December crude rose $2.08 to $58.24 a barrel. Oil prices pared early gains after a government report showed crude inventories stayed flat last week, while gasoline stockpiles climbed more than expected.

Dow component Exxon Mobil (XOM) vaulted 6.48 to 75.41 in above-average turnover, as the stock reclaimed its 50-day line.

World Fuel Services (INT) surged 5.89, or 20%, to 34.66 in more than 2 1/2 times its regular volume. The vendor of marine, aviation and land fuel hit a 52-week high.

The IBD 100, which tracks the action of highly rated stocks, stormed ahead 5.4%.

A gain in weekly jobless claims helped push the market lower early on. New unemployment claims rose to the highest level since right after 9/11. The number of people continuing to file claims hit a 25-year high.

Elsewhere, the Senate Banking Committee pressed bank executives to start using the proceeds of the government's $700 billion rescue plan to initiate more loans.

A few tech stocks fell early on, before rebounding in step with the market. Chipmaker Intel's (INTC) fourth-quarter sales warning after Wednesday's close caused a big drop for the stock early on. But Intel rebounded to gain 7%.

Meanwhile, Citigroup cut its profit forecasts on Hewlett-Packard (HPQ) and Dell, (DELL) triggering early losses. But HP rallied to gain 2%, while Dell shaved its loss to 2%.