Time for a rally!  Today's 'strong' GDP number proves that indeed short term stimulus money was dispersed as promised, and of course it is time to celebrate because the pace pf job losses is no longer growing.  A half million Americans out of work each week is good news to the economists.  They see economic recovery, I see a shorting opportunity.  That is what makes this country and the free market system great.

The mood of this market has changed as sellers have taken charge.  Below is a daily chart of the Nasdaq Composite with an indicator that I developed (I am sure it is not an original idea).  It is a 21 period normalized daily range of price.  There are  a few points worth making here:

 - Notice how the daily ranges expanded on selloffs and contracted on rallies during the spring of 2008 at the left side of the chart.  That was a sign that we were entering a strong decline phase.    

- Now notice how weak the daily ranges are compared to their average (the straight blue line) these last few months.  Bull markets have a greater feeling of comfort and confidence, so the daily ranges are naturally not as wide as they are during panic declines, however the daily ranges during rallies in August and September were positively anemic. 

- Now take a look at the most recent activity to the right of the chart.  Price has broken its almost eight month old trendline off of the March low as daily ranges have expanded.   The last push up to the October highs saw weak participation by any number of momentum indicators, including the 21 day normalized daily range. 





So while this rally contains some who are celebrating the fact that we are still on pace for 'only' 2 million new job losses per month, the stock market is showing that there is reason to believe that the current valuations on equities may be out of line.   You think the economy is recovering?  Just go to a restaurant and mall and see how much traffic is there.  This economy was built on the backs of consumers like you and me and as long as this many workers are losing jobs every week, any 'recovery' will be anything but robust.

The Nasdaq will try to rally up into the 2130 - 2140 area before sellers get serious again.  In yesterday's piece I called for a bounce in the 2040 - 2070 range and we got it.  Now it looks to be one more bounce higher before the mettle of the buy and holders will be tested in earnest.