Leaders Index 1-12-15

The market sold off for the second day in a continuation of the high recent volatility. The major averages opened lower and after making a low about a half hour into the session traded sideways for the rest of the day. The COMPQ was off by .84% while the SPY fell .81%. Both closed in the lower portions of their intraday trading ranges. The fact that they closed so low in their ranges and couldn’t rally off their lows shows that there was not much support under the market. All the major averages are now back below the critical 50dma. The major averages broke below this support level, rallied back above it on the follow through day but are now right back below it. It is a very negative sign when this type of action occurs. Volume was higher across the board so there was distribution on all the major averages. Distribution in the first two or three days after a follow through day is a big red flag. It often leads to a follow through failing. Leading stocks declined as well today, but were not hit as hard as the overall market. The leaders index declined .63% today, less than the major averages. The index tagged the combined 9dma and 17dma at it’s lows but bounced off these moving averages. It bounced back and closed near the top of it’s intraday trading range and it’s relative strength line set a new high. It looks a lot like we are repeating last years pattern of sharp declines followed by short powerful rallies and then new declines. It is very difficult if not impossible to make any meaningful progress in this market unless you are a very gifted short term trader, which I am not. I think the most important trading rule for the current environment is reapply sunscreen often. Jerry