THE BIG IDEA
In last week’s Prime Wave, we found that market conditions were ugly, but not ugly enough to produce a surefire bottom. And then things got a bit uglier on Monday.
And then there was an enormous spike higher on the last day of March.
So now we are all wondering: was that it, or is there another leg down to come?
If the market has collectively decided that enough is enough, one way to know this is via something known as a “follow through day”.
The follow through day was first identified as important for the birth of a new bull market by William O’Neil, stockbroker and founder of Investor’s Business Daily.
A follow through day involves a big up day in the market on higher trading volume than the day before and typically arrives 4-7 business days after the market hit bottom. There are no magical thresholds to cross:
How big is big? Many people consider a 1.5% advance to be necessary. Really, something well above 1% can suffice even if it falls short of 1.5%.
A follow through day can come up to 12 days into the start of a potential bull market. But after Day 7 a possible follow through day should be viewed with some suspicion.
Whatever the specs, the point is that it signals institutional investors, the real engine behind market trends, are beginning to step back in. Without their involvement, rallies tend to fade.
A classic example of a follow through day came after the onset of the COVID-19 pandemic. A possible bottom was in on March 23rd followed by a strong gain on April 2nd accompanied by higher volume than the previous day.
O’Neil preferred to wait for a follow through day as a clear sign that the market has turned, rather than try to guess at where the bottom might have happened.
Of course, there are no guarantees in the stock market and the concept of the follow through day is no different. They do end up failing sometimes.
SEEN ON THE INTERNETS
Early last week, before the market’s epic rebound, we spotted the chart copied below produced by Paul Kedrosky.
Unless you are a chart nerd, it might take a little explaining. The Y axis shows us the point contribution to the S&P 500 so far this year, from each stock in the index. The further toward the bottom of the chart, the more that stock has been responsible for the decline in the index. Microsoft (MSFT) has done the most damage, individually responsible for a cca. 80 point drop in the S&P 500.
In total, the Magnificent 7 stocks and Oracle have done 85% of the damage to the index.
That group of stocks also propelled “the stock market” higher during the good times. What goes up must come down?
NUMBERS ONLY
3.8% | The market has been so beaten down that, even after a 3.7% gain in the last 3 sessions, only 3.8% of S&P stocks are now at a 1-month high. |
418 | Last Tuesday, the S&P 500 contained 418 rising stocks, the best daily result since November. |
38.9% | Shares of Firefly Aerospace (FLY) gained 38.9% last week, due to its connection to the Artemis 2 program. |
SWINGEX INDEX
As of market close on: 2 April 2026
Swingy says: It may not feel like it, but the index says conditions are now neutral.
Learn more about how the Swingex Index works here.
WATCHER
Stocks highlighted here each week are not recommendations to buy or sell. They are provided as ideas for swing traders to follow up on with their own research.
SATS (EchoStar): The Artemis 2 launch and recent news of SpaceX’s intentions to become a public company are drawing the market’s attention. Related companies, like EchoStar, are benefitting from it as well.
From a pure technical analysis point of view, SATS is looking very attractive right now.
It’s all about that smiley-face base that the stock started forming back in January. Two and a half months of going sideways or down has a way of clearing out impatient traders. Yet, the stock is very near to the all-time high it set on January 14th.
If the stock is going to form a cup-and-handle pattern, we can expect another brief period of sideways or down prices to begin right about now. Then the stock should resume going higher with a target price of $155.
And sometimes the strongest stocks skip the handle altogether and just keep heading higher. That is a possibility to happen here.