Leaders Index 6-27-16

It was another ugly session today. After Friday’s decline you would want to see at least something of a bounce, but it didn’t happen. European markets continued lower and we followed them here. The major averages opened lower and after a solid decline they stabilized but spent the rest of the day at their lows. The COMPQ fell 2.41% and the SPX was off 1.81%. Both closed near their intraday trading lows. The real weakness was in the small caps and the semiconductors with the RUT and the SOX falling 3.36% and 4.01% respectively. Volume was lower than Friday, as you would expect after a Russell rebalancing, but it was still well above average. This shows that there was still real selling by large institutional players. Leading stocks were hit hard as well with the leaders index falling 3.06% and closing low in it’s intraday range. Yesterday’s action was contained by the 50dma. Today the index plowed through this important moving average and closed well below it. When leading stocks are below the 50dma they are generally considered broken. Volume on the leaders index was also below Friday’s level but well above average. Crashing through the 50dma on heavy volume is a huge negative for leading stocks. The major averages broke below all their important moving averages today and all are below their respective 200dma’s. The major averages made a run for old highs that might indicate that we are still in an overall cyclical bull market. That attempt has now clearly failed and the case that we are in a bear market that started last summer is still intact. If the market can’t rally soon and with some conviction we will likely go back and test the February lows. Jerry