Leaders Index 10-10-14

The market broke down hard yesterday as the major averages opened lower and sold off for the rest of the day. Strong late selling caused the major averages to close at their lows of the session as large players dumping stocks caused the major averages to finish at their intraday lows. The COMPQ led the way down with a loss of 2.33% while the SPY declined 1.15%. Volume was up a lot across the board and was well above average. This shows that institutional investors were big sellers yesterday. The COMPQ is now well below it’s 200dma while the SPY is sitting on this important moving average. Some of the decline was caused by the semiconductor stocks. They sold off hard after an industry official said sales were weak in a seasonally strong period and the SOX declined 6.89% on massive volume. The SOX often leads the overall market, particularly the Nasd averages. Leading stocks were hit much harder than the overall market as the leaders index fell 4.80% on extremely high volume and closed near the low of the day. The critical 50dma for this index is now a memory and the index along with almost all quality growth stocks are now broken. There have been several times in the last year and a half when the market looked like it was going to correct only to have it turn around and move into new high ground, mostly with the aid of QE. Now it is looking more and more like this time is a different story. We are now in the fifth year of a cyclical bull market that began in March of 2009. That is much longer than the average for cyclical bull markets. Weather this decline turns into something more serious remains to be seen, but at this point a real bear market would be welcome. It would clear the way for a new cyclical bull that would be the prime time for making serious gains. The kind of late cycle we have been seeing lately is a very difficult environment. Jerry