Leaders Index 1-19-18

The market staged another generally positive session yesterday. The major averages opened higher and were in positive territory all day. Late strength saw all the major averages finish at their intraday trading highs, a sign that buying came in late to support prices. The COMPQ rallied .55% while the SPX gained .44%. The greatest strength was in the small and mid-cap stocks with the RUT and the MID higher by 1.33% and 1.07% respectively. Volume was mixed. It was very slightly lower on the Nasd and higher and above average on the New York. This is generally encouraging. Leading stocks were higher as well with the leaders index rallying .58% on higher and above average volume. The index closed high in its trading range and is above all its short term moving averages. It still looks like it is in a consolidation, but the increase on higher volume look encouraging. Friday’s action was good in the face of a certain, and now real, government shut down. The major averages all made new highs and their charts all look very good. Quality growth stocks are acting well, but are lagging a bit as the leaders index is still slightly below its recent all-time highs. Much of this is caused by a couple of components of the index that have broken down. The picture overall looks positive. The market is acting well and advancing in the face of news that could cause it to sell off. The market’s reaction to news is more important than the news itself. This market is acting well in the face of negative news, a sign that higher prices are likely ahead in at least the short term. There was an interesting development late last week in the fact that new lows have been rising as the averages went higher. This is a sign of a bifurcated market. There were Hindenburg Omen signals on both Thursday and Friday, giving us a new confirmed Hindenburg signal. This tells us that there is selling among the smart money. This is a very imprecise indicator and is not good for short term timing, but it tells us we are late in the game and should exercise some degree of caution. It looks like prices will continue higher at least for now, but there are some negative items further out on the horizon that should be watched. Jerry