Step 2 — Market Direction (M)
Is the market working for you?
The M Rules — Quick Reference
Stop Buying When
5+ distribution days in 25 sessions
IBD Market Pulse: "Market in Correction"
Leading stocks breaking key support levels
Follow-through day fails — index undercuts low
Begin Buying When
Follow-through day confirmed (Day 4+, up 1.5%+)
IBD Market Pulse: "Confirmed Uptrend"
Distribution count low (0–2 days)
Volume expanding on up days, contracting on down
Market Criteria — Live Data Coming Soon
S&P 500
Daily performance — benchmark for broad market health
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Nasdaq 100
Growth stock benchmark — most sensitive to institutional buying/selling
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Dow Jones Industrial
Broad market confirmation — divergence from Nasdaq is a warning sign
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Distribution Day Count
Heavy selling days in past 25 sessions — 0–2 healthy, 3–4 warning, 5+ correction
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Past 25 sessions
Follow-Through Day
Day 4+ of rally attempt with SPY (S&P 500) up 1.7%+ on higher volume — signals new uptrend
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Russell 2000
Small-cap health indicator — confirms or diverges from large-cap trend
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NYSE Composite
Broadest U.S. equity benchmark — breadth confirmation across all NYSE-listed stocks
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Proxy via SPY
Market Trend
IBD Market Pulse — rolled-up signal from the 7 criteria above
65
pts / 75 possible
Overall Market Condition
Market in Correction — Proceed with Extreme Caution
IBD's rule is clear: when the market is in correction, stop buying. 75% of stocks follow the market's direction. You may still proceed, but understand you are trading against the primary trend. Most new positions initiated during corrections result in losses.
Scoring weight: The M (Market Direction) criterion carries 75% of your total checklist score. O'Neil's research shows 75% of stocks follow the market's primary trend — fighting it means fighting the odds.