Leaders Index 1-15-16

The rally attempt lasted only one day before the sell off resumed. The major averages gapped lower at the open and continued the selling until about mid session when a late rally saw the major averages close above their lows. That is about all you could say that was good about trading yesterday. The losses were extreme at the low and only slightly less so at the close. The COMPQ led the way lower with a loss of 2.74% while the SPX fell 2.16% and closed in the bottom half of it’s intraday trading range. The COMPQ finished in the upper half of it’s intraday range. Volume was considerably higher across the board and well above average. Some of this was due to an options expiration day, but it also showed that large institutional players were selling stocks. Leading stocks were hit hard as well with the leaders index falling 2.54% on very heavy and above average volume. The index closed in about the middle of it’s intraday range, but still had large losses and set a new low for the move. The 9dma is now well below the 50dma and now seems to be controlling the pattern. The index will have to break above the 9dma and then the 50dma with some conviction to improve the picture. I don’t see that happening. Despite closing off it’s lows yesterday the damage done was significant. The SPX broke below the August lows, and even though it closed above this important level, it joins the NYA in breaking this support. The COMPQ is likely not far behind. We are certainly due for some kind of snap back rally, but it just doesn’t come. When it finally does it will probably be just a good shorting opportunity. The Investors Intelligence bulls and bears ratio flipped this week with more bears than bulls. In corrections in bull markets this is usually enough to contain the decline. In bear markets the bear component usually must get to 50% or more before we see a major bottom. We have a ways to go before we hit that level. At this point it certainly looks like a major top is in and we are in a bear market. Nothing is certain in the stock market, but it looks like we have a ways to go on the down side. Jerry