Leaders Index 6-26-15

It was an ugly session yesterday. We had a kind of a split market with the New York averages holding up and the Nasd averages getting hit. The Dow’s gain was mostly due to NKE and the SPX was off by only .04%. The real damage was done on the Nasd. The COMPQ fell .62% on the day and all the major averages closed low in their intraday trading ranges. Volume was much higher across the board. Much of this increase in volume was due to the Russell rebalancing, but it was still enough to add another distribution day to the COMPQ. The worst damage yesterday was in the semiconductors. The SOX fell 2.44% on the day. Semiconductor stocks are considered bellwethers and the fact that they are breaking down is worrisome. Leading stocks took a big hit yesterday with the leaders index falling 2.49% on huge volume. The index moved further below it’s important 17dma and is showing real weakness. The relative strength line of the index has really turned down, showing that quality growth stocks are no longer outperforming the overall market. Six trading days ago AMBA, the best performing stock of the current rally reversed hard and has continued to show weakness, I said that if more leading stocks followed suit it would be a big negative for the market. That looks like it is happening. Other leaders like PANW and VDSI are looking weaker. Many times in the past year and a half the market looked like it was going to get into real trouble only to have things quickly turn around and move higher. That could happen again, but right now protecting your capital is the most important thing. You don’t have to dump stocks wholesale, but giving stocks less leeway is probably a good idea. Jerry