Jerry Samet
05-13-2020, 07:20 PM
The market continued yesterday’s decline. Before the open Powell made some comments the market didn’t like. The major averages opened lower and after a feeble rally attempt worked their way lower for most of the session. A little late selling saw the major averages finish off their lows , but the declines were substantial. All the major averages closed low in their intraday trading ranges with the COMPQ and the NDX falling 1.54% and 1.24% respectively. The SPX lost 1.75%. Volume was mixed. It was higher by 23.37% on the New York and lower by 1.31% on the Nasd. This produced a distribution day on the New York averages. Leading stocks sold off as well, but less than the overall market. The leaders index declined .97% on the day, but it closed high in its trading range. Volume was higher than yesterday. We had a second day of heavy selling after Powell talked about a prolonged recession being possible. We had a second distribution day on the New York averages, and two solid distribution days in a row are a yellow flag. In addition the Summation Index and the A’s minus E’s both turned lower in the last two days. This is a cause for concern and must be watched closely. The charts of the leaders index still looks ok and it is positive when leading stocks are outperforming the overall market. The charts of the major averages are a little worse but not showing much real damage yet. The turndown of these two shorter term indicators along with the recent distribution are a yellow flag that must be watched closely. If the market can rally back quickly they may well not matter, if not they could be the first real early warning signs of the market weakening. Jerry