Leaders Index 1-29-16

Yesterday was a powerful rally day all around. The market opened higher and continued up throughout the session. Late strength saw all the major averages finish the day at their intraday trading highs, a good sign. The SPX led the way higher with a gain of 2.48% while the COMPQ was close behind, rising 2.38%. The major averages also broke above the consolidation they were forming after the recent decline. Volume was much higher across the board and well above average. This shows that large institutional players were active in yesterday’s market. Much of the positive action yesterday seems to be linked to two factors. The weak GDP number that came out is being read as a signal that the Fed may hold off on further rate increases. The second is the fact that Japan is going to negative interest rates, taking their QE program to a new level. Leading stocks did well also with the leaders index gaining 2.16% on the highest volume in months. There were some stocks in the last couple of days that showed positive action and even buyable gap ups, like FB and ALGN. The leaders index looks like it is showing a small cup and handle pattern. The follow through type action yesterday was impressive. If you look at the three indicators that confirm follow throughs the weekly Coppock is still headed down and has not confirmed. The Eureka signaled earlier in the week on the last follow through and so is still in effect. The %E’s were 31% yesterday. This is a very high number and few follow through actions are successful when they start with the %E’s at this level. All bear markets have tradable rallies and this may well turn out to be one. But last week I did my review of trades for last year and I could see the patterns of declines followed by sharp rallies, mostly into new high ground, that quickly failed. There are a few stocks that are set up now where there were virtually none earlier in the week, but it is still a small number. It is ok to try out a couple of these stocks, but I still think the upside will be limited and the final result will be more of a shorting opportunity. Jerry