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Divine Market's Trend From Indexes' Action.(THE SMART INVESTOR)(INVESTOR'S.COM CORNER)

Investor's Business Daily

| December 01, 2005 | COPYRIGHT 2005 Investor's Business Daily, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright

Byline: KEN SHREVE

Investors are sure to hear more in coming days and weeks about the stock market outlook for 2006.

Some will point to a strong economy and healthy corporate profits as reasons to be bullish. Others will argue that higher interest rates and energy prices are justifications for bearishness.

Set aside the prognostications. One of the most important skills an investor can develop is to learn how to block out the daily noise and listen to the market itself for clues about its underlying health. Spotting new uptrends early on can result in more profitable trades.

And profits can be locked in, or losses minimized, when signs of weakness start to mount in the major stock indexes. Numerous resources at investors.com can help you learn how to gauge underlying market health.

Many IBD readers know the most recent market rally was confirmed on Oct. 19, five days into the rally attempt (1). On that day, three major indexes staged a follow-through day, rising at least 1.5% in heavier volume. The S&P SmallCap 600 soared 2%, the Nasdaq gained 1.7% and the S&P 500 added 1.5%. The Dow lagged with a 1.3% gain.

Volume was not only heavier than the day before, but it was also above average, another positive sign. Follow-throughs have the best chance of succeeding when they occur four to seven days into a rally attempt.

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