Leaders Index 3-19-18

The market got hit pretty hard today. After opening lower the major averages traded lower most of the rest of the day. A little late buying saw them close off their intraday trading lows, but the losses were still substantial. The COMPQ finished with a loss of 1.84% while the SPX declined 1.42%. All the major averages closed in the lower half of their trading ranges, showing a lack of support. Volume was lower across the board, so there was no new distribution today, but that was only because Friday was an expiration day and so had artificially higher volume. Under most circumstances this would qualify as distribution. Leading stocks were hit as well with the leaders index declining 1.82% on the session. The index broke below its short term 9dma support and traded below its 17dma, before closing above this still support level. Unlike the major averages the leaders index finished trading in the upper half of its trading range, a sign of support. Volume was higher than Friday, but still below average. This was enough to produce distribution in quality growth stocks although the high close mitigates this. The market was acting weak even before today, which I have talked about in my previous few updates. The SPX broke below its important 50dma today, joining the other New York averages below this critical moving average. The Nasd averages, which have been holding up better, broke below their short term 9dma and 17dma’s today. They tagged their 50dma’s also but held above this major support level. The selling today was blamed on two main news items. The data problems at Facebook and the news that the EU was looking at a 3% gross receipts tax on American tech companies. These are negative stories, but I am not sure they deserve such a significant sell off. The way the market reacts to news is more important than the news itself. The market reacted pretty badly to the news today. Overall about the only good news out there is that leading stocks continue to act better than the major averages. At this point I don’t know if that will be enough. I would take a very cautious view of the market right now. Jerry