Leaders Index 12-28-15

The market had a down session today. Shorty after the follow through of Dec. 16th there was distribution. Second day distribution after a follow through is usually fatal to a rally attempt. The two days after the follow through were down with the second producing distribution. There were rally days last week after the decline and the major averages regained much of the decline, but on light volume. This is to be expected during a holiday week, but still doesn’t look to good on the charts. Today the major averages opened lower but saw their lowest levels about an hour and a half into trading then rallied into the close. The SPX declined the most, falling .22% while the COMPQ declined .15%. All the major averages closed near their intraday highs. Volume was higher across the board, as you would expect after a half session last Thursday, but it was still enough to add a new distribution day on the SPX. Since there was a legitimate follow through day I created a new leaders index to better reflect the stocks that are acting best right now. It contains 21 stocks in 17 different industry groups, a good cross section of current leadership. I had a pretty tough time coming up with enough names to create a proper index, which says something about the probability of this follow through producing really worthwhile gains. The index was up .13% today on lower volume and is in new high ground on both a price and a relative strength basis, as you would expect on a new index. The charts of the major averages are still looking pretty bad. The COMPQ is still above it’s 200dma but closed today just below it’s important 50dma. The index has crossed above and below these moving averages. The SPX remains below both moving averages and has also been going back and forth over and under them. This is not positive action. It is hard to get to excited about this recent follow through and few stocks are doing well so a good degree of caution is a good idea. We will likely see quiet action this holiday week, although low volume can lead to large price moves. We will probably have to wait until next week to see if this rally attempt can generate anything meaningful. Jerry