Leaders Index 1-27-16

Yesterday’s follow through hit a brick wall today. The market opened lower and after a couple of hours of trading made a feeble rally attempt before it started lower. The Fed announcement came out and the major averages rolled over into significant losses. The COMPQ finished lower by 2.18% and the SPX fell 1.09%. Both closed low in their intraday trading ranges, a sign of weakness. Volume was higher across the board, showing that large institutional players were selling heavily. This produced distribution on all the major averages. A distribution day right after a follow through usually means the follow through will fail. Leading stocks got hit as well with the leaders index falling 2.25% on much higher and above average volume. The index tagged a confluence of it’s 17dma and 50dma and bounced off them. It still finished low in it’s trading range. These moving averages should provide support for the index. If it breaks below them it will be very negative. Today’s action pretty much negated yesterday’s follow through and IBD went to market under pressure. After the close Facebook reported a very strong quarter and the stock is trading up sharply after hours. Barring unexpected news overnight it should have a buyable gap up tomorrow. This is a leading big cap stock and may well set the tone for the market. If it acts poorly it will tell us a lot. There is really nothing to buy right now anyway so cash is the place to be. Jerry