Leaders Index 10-2-15

It was another wild day yesterday. The employment report came out much weaker than expected and the markets gapped down at the open. It looked like it was going to be a negative session, but the major averages reversed about forty minutes into trading and rallied for the rest of the day. They all closed with strong gains. The COMPQ led the way with a gain of 1.74% while the SPX gained 1.43%. Volume was higher across the board and the SPX was in the fourth day of a rally attempt so it qualified as a follow through day. The was no follow through on the COMPQ as it was only the third day after a rally day. All the major averages finished at or near their intraday highs, a sign of support from large institutional players. I put together a new leaders index due to the follow through, but like the last one I had a hard time finding enough stocks to fill out the index. There are nineteen stocks in the index from fifteen different industry groups. I usually put in a lot of extended stocks with great fundamentals so the index chart would be extended and thus vulnerable to a sell off. I could find few stocks that met these qualifications so I included many in bases or that just have held up and have great earnings. The index was up 1.68% yesterday on lower but still above average volume. I had said that the previous index had to break back above it’s 50dma to improve the picture. It came right up to this important moving average yester but did not get above it. I will continue to include the chart of this index in my updates for a while so we can see if it can rally further. There are three indicators I use to confirm follow through days and like the last one this one was confirmed by only one. There was a Eureka signal on Wednesday, but not yesterday. The %Es are at 23%, much to high for it to confirm and the weekly Coppock is not near a signal. The major averages now have a declining 50dma as their next important resistance. I would expect them to rally to this moving average and weather or not they can get above it with conviction will tell us a lot about the direction of the market. I don’t have much more confidence in this follow through than I did in the last one, but we will have to see. There are not a lot of attractive stocks to buy right now so positions should be taken carefully. Jerry