Leaders Index 12-3-21

The market got hit again yesterday. The employment report came in much weaker than expected yesterday and the market opened slightly higher on the news. It didn’t last. The major averages saw their highs in the first five minutes of trading and it was pretty much all down hill from there. A little late buying saw the major averages finish just off their lows, but all closed near the bottom of their intraday trading ranges. The worst damage was in the Nasd averages with the COMPQ and the NDX declining 1.92% and 1.74% respectively. The SPX fell .84%. Volume was higher across the board. It rose 5.56% on the New York and 7.77% on the Nasd. This produced distribution on all the major averages and showed that large institutional players were selling stock yesterday. Leading stocks were hit hard as well with the leaders index falling 3.43% on the day. The index closed low in its trading range on higher and well above average volume. This was a new low for the index on both a closing and an intraday basis. The selloff continued yesterday and the rally that began with the 10/14 follow through is effectively over. This follow through was poorly confirmed and didn’t produce a strong rally. The leaders index and the major averages made new lows for the sell off yesterday and the charts off all of them look pretty bad. This was a fairly weak rally to begin with and the combination of the Omicron variant and Fed talk of speeding up the tapering and possible rate increases killed it. Santa was not able to overcome these obstacles. It is disappointing that the yearend rally that usually occurs was cut short, but it does happen sometimes. Right now a defensive posture is warranted. There may be some rally days before year end, but the chances of any sustained movement are small. Now we have to watch and see how bad this correction is going to be. That is hard to know in advance, but it could be bigger than expected. The signs of an important top and the late stages of a bull market are many, but we can’t tell now if it will be a minor sell off followed by a rally or a serious decline. Time will tell. Jerry