Leaders Index 4-5

[Jerry Samet]

The market had a pretty negative week last week. the major averages sold off and tested important moving averages. Volume built up on the down days and added to the distribution count. All the major averages now have six days of distribution, which is a dangerous level. The COMPQ and and NYA traded below their 50dma’s, but a rally late in the day allowed them the close above these levels and near the highs of the day. This is about the only positive in recent action. Leading stocks are acting much worse than the overall market with the leaders index dropping .38% on the day on lower and about average volume. The index has now closed below the important 17dma for the third straight day and the RS line of the index is weakening. Recent breakouts are almost all failing. The weekly Coppock, after flashing warning signs for the last two weeks finally gave a definitive sell signal on the Nasd averages, although it missed a signal on the Dow and SPX by a hair. These will likely come next week. In the past these signals have sometimes preceded peaks in the major averages although they coincide well with momentum peaks in leading stocks, which we are seeing. The MEN went to cash with the buy switch off and DR. K’s model also went to cash. Nothing is ever carved in stone in the market and all the money being pumped out by the Fed could always cause the overall market to rally somewhat higher, but if the rally isn’t dead it is certainly on life support. Jerry