Leaders Index 2-21-20

The market took a pretty hard hit yesterday, mostly on news that the coronavirus seems to be spreading in countries outside China. The major averages opened lower and were mostly down for the remainder of the session. All the major averages closed in the lower half of their intraday trading ranges, showing that there was little buying interest as prices fell. The Nasd averages were the weakest with the COMPQ and the NDX declining 1.79% and 1.88% respectively. The SPC fell a smaller 1.05%. Volume was the only bright spot yesterday. It was lower across the board, but the declines were small. It declined by 7.27% on the New York and 1.56% on the Nasd, according to Esignal. The decline in Nasd volume was very small and other data sources could come up with different results. IBD said volume was a little higher on the Nasd and so gave it another distribution day. Leading stocks were hit hard as well with the leaders index falling 2.39% on the session. The index closed low in its trading range and volume was higher and well above average. The index closed right on its 17dma and held this important moving average. Fears of the virus spreading outside China hit market around the world. The damage done yesterday was real. The leaders index just broke out into new high ground on Wednesday and that was lost yesterday. The charts of the major averages still look ok with the selloff yesterday taken in the context of the recent advance. The action was unsettling. The distribution count is getting higher and the failure of the breakout in the leaders index is worrisome. If the coronavirus continues to spread it will cause further declines in markets around the world. This has the potential to end the current rally and cause a correction of at least a short term nature and possibly even intermediate term proportions. We must see the news calm down quickly and the market rally back early next week or the situation could get worse quickly. A more defensive posture is warranted now. Jerry