Jerry Samet
10-31-2015, 11:51 AM
The market sold off yesterday. The major averages were lower most of the session and after a mid session rally attempt sold off into the close and finished at their intraday lows. The SPX lost .48% while the COMPQ declined .40%. Volume was higher across the board so there was distribution on all the major averages. Leading stocks were hit harder than the overall market with the leaders index falling 1.81% on higher but still below average volume. The index moved further below it’s important 17dma and finished low in it’s intraday trading range. The relative strength line of the leaders index continued to weaken and is now in a clear down trend. This can also be seen in the IBD 50. For the last two trading sessions the index has tried to break above it’s 50dma and has failed. The major averages cleared this important moving average a long time ago. We continue to be in a market where the major averages, led by a small number of mega cap mostly tech stocks, are outperforming quality growth stocks. This is the type of action seen in the very late stages of a bull cycle or the early stages of a bear cycle. We really don’t know which we are in right now, but bear markets are like recessions, you don’t know for certain you are in one until it is about half over. It will take more time before we can really know, but we do know this is a tough market and positions should probably be targeted to large cap stocks that are reporting good earnings. Jerry