Leaders Index 11-14-17

The market was lower all day, mostly on worry about the passage of the tax bill. There was a late recovery on some news that more Senators may back the bill, but the major averages couldn’t regain all its early losses. The COMPQ finished with a loss of .29% while the SPX lost .23%. All the major averages closed at or near their intraday trading highs, a sign that buying came in latter in the session. Volume was higher across the board, but was below average on both exchanges. This was enough to produce a fresh distribution day on all the major averages. Leading stocks traded in a tight range with the leaders index higher by .06% on the day. The index closed in the upper half of its trading range, a generally positive sign. Volume was lower and well below average, which is what you want to see as an index is consolidating. The relative strength line of the leaders index made a new high today as it held tight as the major averages fell. We continue in a consolidation/ mild sell off. This fits the pattern we have seen for over a year now. The leaders index in forming a nice flat base after running into new high ground. The major averages are doing the same thing. So far they are acting in a fairly constructive manner, although there are some cracks starting to show. The Transports and the small caps averages are below their important 50dma’s, which is negative. We are also seeing excessive levels of sentiment and valuation, which are usually seen late in a cycle. The distribution count is also building, especially on the Nasd averages. We also had another Hindenburg signal yesterday, adding to the recent cluster. In the short the market will likely be strongly effected by news about the tax reform bill, which makes the short term action hard to predict. So far the short term action looks ok and I haven’t seen enough evidence that the rally is in real trouble in the short term, but there are real issues forming in the longer term. Jerry