Excellent action today! AAPL blew through its 20 Day Exponential Moving Average yesterday (wednesday Oct 29), settled back down and used it to blast off again this morning. AAPL is definitely ahead of the Tech Sector pack. If I had to pick a sector to trade right now, it wouldn’t be Tech. Energy and Commodities look much better overall, however AAPL is the shining exception!

So, what are the buy signals that have tipped this rally? The first are the huge number of stocks with positive divergences that have appeared since last week on their MACDs and RSIs. The second are the huge number of negative divergences that have appeared on sentiment indicators, like the Volatility Index (VIX), and inverse ETFs like the ProShares Ultra Short S&P 500 (SDS).

Yesterday I’ve shared numerous setups with the Wilderness Members through the email alerts and we’ve done extremely well with them. In fact we nailed the bottom on Tuesday just right, with a play on the Ultra QQQ ProShares, which is a 2x Exchange Traded Fund (ETF) that tracks the Nasdaq 200%. Many Wilderness members logged a 20% gain in one day!. I almost walked away from the call on Monday evening when we had that huge late session decline. But held on and caught the rally right at the bottom on Tuesday morning. Check out this blog-podcasts which recapped my early call of the bottom, entitled The 2002 Bear Low Blues, and then the following day where we caught it dead on, in this blog entry What a Difference a Day Makes and the accompanying podcast.

This rally is strong, and market internals have confirmed that strength for 3 solid consecutive sessions, with excellent Advance-Decline lines. Advancers have outpaced decliners by wide margins across most sectors, meaning there’s broad-based support for this rally. When’s the last time we could have said that? I can’t remember! Our biggest near-term obstacle, from the broader market perspective, is the 20 Day MAs. With AAPL, the biggest obstacle is 120, which represents the gap down in the end of September.

The S&P tipped the 20 Day MA both today and yesterday. Normally I might look at that as a potential barrier, and exercise caution, perhaps wait for a pullback. But this rally has legs, and I’m more inclined to say buy on any weakness and ride the trend. I believe this rally may last for several weeks, maybe even to the end of the year.

Now for the sobering news. We just came off the tail of one of the worst Bear runs of all time. There’s nothing that would surprise me at this point, including a drop in the Down of 300-500 points. The economy is still in the tank and unemployment is on the rise. The GDP is shrinking, although at a slightly slower pace than expected, and the credit crunch is finished claiming victims. I don’t think this Bear market is finished. But within Bear markets there are often huge rallies, and you can’t just sit around and let it pass you by.

In the face of all that bad karma that got us to this point, you have to wonder what the future holds. Is the market putting in THE bottom? Or, is this just a strong Bear rally, a resting place in a longer journey down? Well I’m not going to wander around wondering which way the market will go. I’m of the mind to attack this opportunity and make hay while the sun shines. But I think it’s best to temper that enthusiasm, until we can clear the 20s on the indexes. Once that happens I’ll be feeling much more brazen, and the next route on the way to nirvana is the 50s.

The Investor in the Wilderness Podcast

That’s right, many of the Wilderness posts are now also simulcasts as podcasts. You can subscribe to the Wilderness podcast on iTunes Just Click here, or click Gyasi the Ridgeback to the left. My goal is to produce a podcast prior to each trading session that helps prepare Wilderness Investors, and one on the weekend that will cover a variety of topics. Listen to a few of the episodes, and if you like it, then subscribe and leave a review.