Leaders Index 3-2-18

The market opened a bit weaker yesterday and it looked like it would be another negative session. Within a half hour of the open the major averages bottomed out and rallied for the rest of the day. The COMPQ finished with a gain of 1.08% while the SPX rallied .51%. The greatest strength was in the semiconductor stocks with the SOX higher by 1.76%. All the major averages closed at their intraday trading highs, a sign of support. Volume was a problem. It was lower across the board. Not what you want to see when prices rebound. Leading stocks had a good session with the leaders index reversing higher. The index tagged its important 17dma during the trading day but rallied back to close at its intraday high. The index gained 2.15% on the session and finished at a new closing high, but only by a small amount. The relative strength line of the leaders index is easily in new high ground. Volume was slightly lower but still above average. The market had a positive reversal yesterday, at least on a price basis. This kind of reversal is often associated with a least short term bottoms, so there may well be some more upside next week, but we don’t know how far it may go. The fact that leading stocks are outperforming the overall market is a good sign, and perhaps the best thing the market has going for it right now. The real problem we are facing is the continuing pattern of high volume on declines and lower volume on the rallies. This is a pattern of distribution and shows that large institutional players are unloading stocks. If it continues any rally would likely be short lived. If the market is going to stage a sustainable rally this pattern will have to be broken by rally days on strong volume. If not any price increase next week will probably not hold. Jerry