Leaders Index 2-8-18

There was no update yesterday as I was having some computer problems. The market really got pasted again today. After opening lower the major averages sold off for the rest of the session. Some late selling saw all the major averages finish at their intraday trading lows. The COMPQ was lower by 3.90% while the SPX declined 3.75%. Volume was higher and above averages on both exchanges. This was enough to produce fresh distribution days on all the major averages. Leading stocks were hit hard as well with the leaders index falling 5.65% on higher and well above average volume. This was distribution in leading stocks as well as the major averages. The index closed almost at the bottom of its trading range as there was no buying support as prices fell. The index finished just above the bottom of Tuesday’s low. There was only one stock in the IBD 50 that was up today, that was GRUB which gained 27.36% on a big earnings beat yesterday. The action of the market is very negative right now. You expect some correction after a nice advance, but you want it to be orderly. Recent action has not been orderly. All the major averages took out the lows of last Tuesday and are in new low territory for the correction. A lot of stocks that have been leading the rally have broken down. There has been high volume along with the price declines, showing that large institutional players were selling stocks and producing a high distribution count. All the major averages are below their important 50day moving averages as the Nasd averages broke back below this former support level after regaining it on Tuesday. They are all now down just short of 10% from their highs, breaking below the important 8% level. This makes the chances of this turning into a full-fledged intermediate correction of between 12% and 15% much higher. The picture looks pretty bad right now and an intermediate correction, if one develops, will be painful. If that happens the question will be whether it will turn into a bear market with a 20% or more decline. As always we will have to let the market tell us what it is going to do. Jerry