Stocks Bounce Higher As Rally Attempt Hits Day Two BY JONAH KERI INVESTOR'S BUSINESS DAILY Posted 8/2/2007 Another round of late-day gains lifted stocks Thursday. Fueled by a final-hour surge, the major indexes ended in the black. The Nasdaq climbed 0.9%. The Dow industrials rose 0.8%, the NYSE composite 0.5%, the S&P 500 0.4%. Volume eased across the board. The market fell into a correction last week. As the market weakened, big price drops accompanied stocks' increased volatility. The broad indexes reversed lower several times, closing at the bottom of their intraday ranges. Stocks again traded in an uneven pattern Thursday, following similar action a day earlier. The price swings were smaller by comparison, though. Plus, the market's stronger finishes are an encouraging sign. With that said, don't get ahead of yourself. Thursday marked Day 2 of the market's rally attempt. You're looking for a big price gain by one or more of the major indexes, on Day 4 or later of the rally try. Also, look for higher volume than the previous session when that price jump happens. Until then, the best course of action remains the same. Reduce your exposure by getting off margin. Sell your laggard stocks, both the ones that are down from your buy price and those that have managed only meager gains. Exercise patience. Don't try to anticipate a market upturn or a follow-through before it happens. Let the price and volume action of the major indexes and leading stocks guide your hand. Follow their lead, instead of trying to predict what they might do. If you decide to hold onto a stock or two, it's best if you take a stand with elite, institutional-quality issues. But as you do so, remember that every stock eventually will get hit if a correction lasts long enough, even those with the strongest fundamentals and the most robust technical action. Taking stock of your capital and your confidence levels can help inform your decisions. Say you have a stock that's up 50% from your buy point. If a correction persists, that stock could easily fall 25% off its high as it forms a base. Ask yourself: Is my cushion big enough and my confidence sound enough that I can sit through that kind of pullback? If you don't think you can, taking some profits off the table can help you avoid selling at an inopportune time. Concerns about the subprime mortgage market and tighter credit standards continue weighing on Wall Street. Thursday, Accredited Home Lenders (LEND) warned it may go out of business. Shares plunged 35%. Its acquisition by buyout firm Lone Star is now in doubt. Elsewhere, a pocket of resurging stocks fared well. Nokia, (NOK) a telecom darling in the booming 1990s, has returned to prominence. The Finnish mobile handset maker jumped 2.49 to 30.90 on more than three times its normal trade, as it topped quarterly earnings estimates. Two leaders, mutual fund advisory firm Morningstar (MORN) and diagnostic testing firm Gen-Probe, (GPRO) also leapt to new highs thanks to strong results.