Leaders Index 1-7-16

Things are getting really ugly. After the Chinese market hit it’s seven percent down limit in the first half hour and closed markets around the world followed suit. The major averages sold off hard at the open and after a feeble rally attempt sold off for the rest of the session, finishing at their intraday lows. The COMPQ led the way down with a loss of 3.03% while the SPX was not far behind, falling 2.37%. Volume increased dramatically across the board and was well above average. In fact it was the highest volume of the week. Leading stocks were hit as well with the leaders index falling 2.65% on much higher and above average volume. It also had the highest volume of the week today. The index remains below it’s short term 9dma and 17dma. Today it traded below the important 50dma but managed to close slightly above it. If you look at the Marketsmith 250 it shows 20 stocks up on volume and 1314 stocks down on volume. These are the worst numbers since the sharp declines of late August. The worst charts belong to the small cap and mid cap stocks. Both the RUT and the MID broke decisively below their lows in late August. This is very negative and may be signaling the same action by the major averages that are more heavily influenced by the larger cap stocks. The market is pretty oversold right now after the declines of the worst week in a long time. It would not be unexpected to see at least a short term bounce soon, but I don’t think it would be anything to get excited about. A rally here would probably be a better shorting opportunity than one to go long. Jerry