Leaders Index 9-25-15

The market had an ugly reversal yesterday. After opening strong the major averages traded sideways for a while then sold off hard. The COMPQ was up over 50 points, or one percent, and closed down 1.01%. The SPX had a twenty point gain and finished flat with a .05% loss. All the major averages finished near the lows of their intraday trading ranges. Volume on the session was mixed, higher on the Nasd and lower on the New York. This produced a sixth distribution day for the COMPQ. IBD went to a correction call, killing the recent follow through. Leading stocks were hit hard as well with the leaders index losing 3.33% on the day and closing near the bottom of it’s intraday range. It blew through the important 17dma that it has been playing with for the last three trading sessions. It even came close to the critical 50dma. Volume was higher on the index so there was distribution here as well. A lot of this decline was caused by a 4.77% decline in PAYC and a 6.45% fall in INGN, but there were two and three percent declines in several other components of the index. If the index breaks below it’s 50dma it will be very negative. The market is looking more and more sickly. After the decline on Aug. 24 the market made a rally attempt and I said that the target for the bull case was a rally to the 200dma on the COMPQ and a break above it. The index did rally up to this moving average and on the day of the Fed announcement broke above it and tagged the 50dma. It then reversed on that same day and has sold off hard ever since. It looks like the bull scenario has failed. The key now is the low of Aug. 24. If the index breaks below this level it will greatly strengthen the bear case. It would also likely begin the second down leg if this is truly a bear market. Jerry