Leaders Index 10-13-14

It was another ugly session for both the major averages and leading stocks. After early weakness the market tried to rally mid day, but was unable to hold the gains. Late selling saw all the major averages close at their intraday lows. The SPY was down 1.65% on the day while the COMPQ lost 1.46%. All the major averages are well below their 200dma’s. After Friday’s strong sell off you would have expected to see a bounce today, the fact that it didn’t happen is a bad sign. Volume was lower across the board from Friday, but still well above average. This shows that large institutional players are still selling stock. Leading stocks were hit much harder than the overall market with the leaders index declining 4.71% on volume that was lower than Friday but still very heavy. Quality growth stocks are under distribution. The index continued to decline below it’s 50dma with three large red candles in a row. We are now in what looks like a real correction. The COMPQ has now passed below the eight percent down level that contains the vast majority of declines. It looks like we will have a real intermediate term correction, or even a full blown bear market. We are at the end of the current QE program and about all I can see that would get the market rallying would be for the Fed to reverse course and institute another round of money printing. This could happen if things get ugly enough and you would expect the market to bounce after such a strong decline(as of this writing the futures are higher), but for now I see no reason to hold stocks. Jerry