Leaders Index 12-4-17

The market put in another very negative session today. After opening with good gains after the Senate passed its tax reform bill over the weekend the major averages showed strong gains early, but couldn’t hold them. The Nasd averages were hit hard again after giving up all its early gains. The COMPQ and the NDX lost 1.05% and 1.17% respectively. The semiconductor stocks were hit hardest again with the SOX declining 2.45%. The New York averages held up better, but also gave up large gains. The SPX closed down .11% on the session while the DOW was slightly higher. Continued strength in financials and housing stocks were mostly the cause. All the major averages closed low in their intraday trading ranges, a sign that there was significant selling into the early gains. Volume was higher across the board, meaning that large institutional players were selling stock today. Volume was higher across the board, producing a new distribution day on the Nasd averages. The decline in the SPX was too small to qualify as distribution. Leading stocks were crushed again. The leaders index was off by 4.38% and closed at the bottom of its trading range. Volume was considerably higher than Friday and well above average. The index broke below its critical 50dmaand the relative strength line of the index also broke below its 50dma. The market is in a lot of trouble right now. Massive damage has been done to leading stocks. When stocks that have been market leaders all year break down in mass it is a huge red flag and usually means the rally is over. The charts of the major averages look better than the leaders index and individual leading stocks, but this may not last. Every time in more than a year when there has been a small decline the market and quality growth stocks have bounced back strongly. But none of those earlier small declines saw the kind of damage we see now. There are large divergences in the markets right now. The real question going forward is how those divergences will be resolved. Either leading stocks and the Nasd and tech averages will stage dramatic reversals or the New York and other major averages will join individual leaders in rolling over. With the extent of the damage already done, the weight of the evidence currently suggests the latter outcome is more likely. J