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To: irv_mermelstein who started this subject	10/27/2000 1:53:14 PM
From: irv_mermelstein	of 15

[Rally Confirmations --Conclusion] I'm going to finish this harangue about the IBD rally confirmation method and then get on to some more positive things in my next post. My apologies to IBD--its a great tool and I use it every day, but I just have to get this out of my system. In the previous posts on this subject, I mentioned problems with the 1% rule (that is, rallies can be confirmed on the basis of as little as a 1% move up) and the 1-day rule (rallies can be confirmed on the basis of only a single day's activity). The next problem is that rallies can be confirmed, according to IBD, on the basis of movement in the Dow industrials alone. So on Wednesday of this week, IBD said that the 1.2% move in the NYSE on Tuesday confirmed the rally attempt that started the previous Thursday. But the two stocks that gave the Dow its biggest move on Tuesday were JP Morgan and P&G. This is, of course, just plain silly and IBD was pretty sheepish about its report. A 1% move of that type tells us very little about the direction of the broader market. Next item: IBD says basically that the market has not really rallied until "quality stocks have broken out of sound bases and continue higher." What does that mean? Most investors will be scratching their heads at this one and asking "which stocks and which bases are sound enough to meet this test?" This is not a workable criterion because only IBD can really know when it has been met. Last point: Even if a rally is confirmed, the real question is this: So what? Are you going to rush in and start buying stocks? If the rally is not confirmed, are you going to start dumping stocks? I wouldn't. The market will tell you what stocks to get out of and what stocks to stay in, on a stock by stock basis. The bottom line is that the rally confirmation stuff is interesting, but (especially in a stock picker's market like the current one) it isn't very useful. Irv Mermelstein www.profitsovertime.com

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