Leaders Index 11-9-18

The market put in a pretty negative session yesterday. After opening lower the major averages worked their way down for most of the day. Late buying allowed them to finish off their lows, but the losses were still substantial. The Nasd averages were the weakest with the COMPQ and the NDX off by 1.65% and 1.67% respectively. The SPX was lower by .92%. The Nasd averages closed in the lower half of their intraday trading ranges while the SPX finished just above the midpoint of its trading range. Volume was mixed, lower on the Nasd and higher on the New York. The higher volume on the New York combined with the decline produced a distribution day on the New York averages. Leading stocks were lower as well with the leaders index falling 1.50% on the day and closing just below the midpoint of its trading range. Volume on the leaders index was lower than Thursday although it was a bit above average. This shows that there less selling pressure in quality growth stocks and the chart of the leaders index still looks good. Yesterday’s action was overall a negative for the new rally attempt. The Nasd averages were hit hard, but the lower volume was enough to avoid distribution. The day’s action brought them back below their respective 200dma’s that they regained on the follow through day last Wednesday. When a major average or an individual stock break an important moving average, regains it and then lose it again it is a very negative sign and usually points to lower prices ahead. The SPX still is above its 200dma, but it had a distribution day yesterday. The SPX closed in the upper half of its trading range by a little bit, but this takes a little of the sting off the distribution, but it is still there. A distribution day within three days of the follow through usually leads to a failure of that follow through so this is an overall negative. In addition the COMPQ closed below the low of the follow through day which in the Market School model brings it back to a cash position. The late rebound yesterday bringing the SPX close into the upper half of its trading range clouded the day’s action a bit, but there still was a distribution day. The follow through that occurred last Wednesday is on shaky ground and some caution is warranted. An interesting stock to watch is ULTA. It has been acting well and if this one fails it will be an indication of weakness for the entire market. I will be away at the Traders Expo in Vegas for a couple of days next week so there will be no updates. They will resume next weekend. Jerry