Jerry Samet
05-18-2015, 07:37 PM
A lot seems to have happened since I was away. The major averages rallied and there was a legitimate follow through on the COMPQ. There has been some strength since with the major averages all closing at their intraday highs after being in positive territory most of the session. The COMPQ gained .60% while the SPX was higher by .30%. The small caps led the way today with a gain of 1.09%. Since there was a follow through I decided to create a new leaders index. Too many stocks in the last index were broken and it was just dancing with the 17dma. This index is composed of twenty one stocks in seventeen different industry groups. As you can see both the index and the relative strength line are sticking almost straight up, just what you want to see in a new index. These stocks should get hit fast and hard if the market starts to show real weakness. That is the primary purpose of the leaders index, to warn us when quality growth stocks are weakening, which usually leads to weakness in the overall market. We have seen many follow through days and reversals in the last year and a half. In this time a follow through or a move into new high ground has been a better time to sell than to buy at least as often as not. As there was a follow through it is time to look at the three indicators we use to confirm these important signals. This time only one of the three is confirming the follow through. The %E’s were 8.1% on Thursday, the day of the follow through, which is within the proper range. The weekly Coppock is not in a position to signal and while there could be a Eureka in the next few days there has not been one yet. This makes this a poorly confirmed signal. It is ok to take positions now and see how they work out, and there were breakouts today such as AMBA and SWKS, but I would be careful. While you can participate in any advance if it develops, this is a time to pay more attention to not losing money than making money. Jerry