Leaders Index 2-1-16

Overall it was a pretty solid session for the market. After Friday’s large advance it would not be unexpected to see the major averages pull back. Early on it looked like that would happen as the major averages sold off with declining oil prices. In a little over a half hour of trading the major averages bottomed out and began a rally that lasted the rest of the day. The major averages closed little changes on the session with the COMPQ gaining .14% while the SPY lost only .04%. Both closed near their intraday trading highs, a sign of strength. Volume was lower than Friday, which is not unexpected considering how high the volume was on Friday. Leading stocks outperformed the overall market today with the leaders index gaining .30% and closing high in it’s intraday range. Volume was lower than Friday but was still above average. The relative strength line of the index is near it’s highs. Rallies in bear markets are tricky things. They tend to be sharp and draw you in, right before they fail. In the last bear market of 2007 to 2009 there was only one real tradable rally. It was from late March of 2008 into May of that year. It was not very powerful, but there was some money that could be made. It was kicked off by a follow through day that occurred on March 20th and was a successful follow through based on the rules we use. That follow through was confirmed by all three of the indicators, giving it a strong chance of success. The current rally attempt was confirmed by only one, the Eureka. There are some stocks that are set up and looking attractive, but it is still not a large number. GOOGL will join them tomorrow with a buyable gap up after a strong earnings report. I don’t know if this will prove to be a tradable rally and neither does anyone else. There are some stocks to try, but I would not get to heavily invested and stay very close to the exits. Jerry