Leaders Index 12-7-18

The market staged a reversal on Thursday after more dovish news from the Fed in what looked like a least a short term bottom. The market opened a little higher yesterday, but it didn’t last. Selling came in and the major averages declined into the close. All the major averages finished with substantial losses. The COMPQ and the NDX were off by 3.05% and 3.30% respectively. The SPX declined 2.33%. All the major averages finished at or very near their intraday trading lows, a negative sign. Volume was lower across the board, about the only positive in yesterday’s action. Leading stocks were hit hard as well with the leaders index falling 3.10% on the day. The index broke below its important 17dma support level and closed low in its trading range. Volume was lower and slightly below average. The market looks like it is in real trouble. The kind of reversal we saw on Friday usually leads to at least some positive action. It didn’t this time. The selling quickly returned and took prices back to their Thursday’s lows. I said recently that there were two things that could turn the market higher, the Fed lightening up on rate hikes and a trade deal at the G20 meeting. Both those bullets have been fired and it doesn’t appear that they have had much effect. The follow through that came with Powell’s statements a week ago Wednesday looks like it will fail. It hasn’t taken out the lows of the rally day yet, but it seems like it is only a matter of time. That makes two failed follow through days in a row. This is the kind of action you see in a bear market. You get follow through after follow through that suck you in and quickly fail. The small cap averages made new lows and are getting close to the 20% decline that marks a bear market. There isn’t much positive out there right now and it looks like lower prices are ahead. Jerry