We’ve all read the headlines today – the Dow gained 280 points, a feat which hasn’t happened in four years.  The bulls mauled the bears today, and the buying pressure far outweighed the selling pressure.

All major indexes, with the exception of the Russell 2000 (Small cap) broke to new highs, the S&P 500 and Dow 30 made new all-time highs, and the Nasdaq made new six-year highs. All sectors advanced, as did all industries.  Today was an absolute rout for those who believe the market should be headed lower.

Words can’t describe the situation as well as a chart, and so without further delay:

The Intra-day Action of the DIA:

The Dow Jones itself:

The Nasdaq (gap and run):

The Russell (today’s “laggard”):

The Dow had the ‘longest’ white candle, but only because the index does not record gaps like the Nasdaq and others do.  Today’s rally was driven by short-covering as well… panic covering, if I might add.

The Sector action was impressive, as well.  Materials experienced the largest gain, followed by Energy and Financials.

The large rally took many traders by surprise, myself included.  It’s extremely hard to capture a trend day, and you have to be either a very sophisticated trader to do so, or just very lucky.  As a trader, it’s so tempting to try to go countertrend, or to doubt market strength and attempt to fade it.

You can pick up subtle clues from the TICK and the TRIN, but it takes experiencing a few of these days to understand what to look for ‘in the air’ to see whether odds favor growing strength or waning strength as the day progresses.

I hope you did well today as a day-trader, or if you are a swing trader, I hope today put many of your positions in the green significantly.  Days like this have the potential to make or break an entire month for traders.  For outsiders, this business looks easy but for those of us who trade and analyze every day, we know that we ‘nickel and dime’ our way to profits and hold out for these types of days to make up for everything else.

Always know that days like this do happen, they can happen, and you can profit nicely from them.  Also realize that capturing such a day will take immense skills and study (and actual market experience/exposure).

It is also important to note that these days do not often repeat themselves exactly the next day.  In other words, you can’t watch the TV news and hear about such a day and then walk up the next day and extract magic profits.  Often, these days appear unexpectedly from low-volatility (or low attention) conditions.  In other words, what makes price continue is the fact that so many traders are thrown off balance and are scrambling either to enter or exit significant positions.

Anyway, take the time to study today’s action from as many angles as possible, document them, and use it as a reference.