Leaders Index 1-16-15

After the weakness in the first four days of last week we got a snapback rally yesterday. After a decline it is important to see the quality of the bounce. We had a good rally on a price basis yesterday, but if you look at the charts it is not that impressive. The major averages all finished at their intraday highs and the COMPQ gained 1.39% while the SPX gained 1.34%. The small caps were strongest yesterday with the RUT gaining 1.90%. A key issue yesterday was volume. On a real strong rally you want to see good strong volume. We didn’t get that yesterday. Nasd volume was about flat on the day and New York volume was a little murky. IBD showed New York volume declining 3.5% while Marketsmith and Esignal showed slightly higher volume. Either way volume figures were not impressive. Friday was an expiration day which usually brings spikes in volume. The fact that there was basically flat volume yesterday shows that large institutional players were not enthusiastic buyers. Leading stocks also rallied on the day with the leaders index climbing 2.48% and closing near it’s intraday high. Volume was lower than Thursday and well below average. This shows there was not much buying pressure in quality growth stocks either. The index came back up to it’s important 17dma, but did not get above it. Breaking above this moving average, especially with conviction, would be a positive sign. We will have to see if this snapback amounts to anything. It would not be unexpected to see the major averages rally back to their 50dma’s. The real real test will be if they can regain this level with volume, hold it and then build on those gains. I really don’t, at this point , see any reason to get to excited about yesterday’s action. Breakouts are not working and the chances of making gains that are worth the risk of exposing capital right now are low. Until the major averages regain their 50dma’s on volume and breakouts start working the sidelines are the best place to be. Jerry