Leaders Index 12-12-14

It was a pretty ugly session yesterday. The market opened weaker and never recovered. After stabilizing mid session, late weakness saw all the major averages closing at the lows of the day. The New York averages took the worst hit with the SPY lower by 1.62% while the COMPQ fell 1.16%. Volume was higher across the board, so there was clear cut distribution on all the major averages. With a stall day that was in the back pocket there are now five distribution days on the COMPQ and four on the SPY. This is a high level of distribution and a real warning that the rally is in serious trouble. Leading stocks were hit along with the overall market with the leaders index declining .71% and closing near the bottom of it’s intraday range. Volume on the index was lower than Thursday so the selling was not that intense and the index has not broken below it’s recent trading range. Despite this the chart does not look well as the leaders index was not able to make any progress while the major averages were advancing. There has been real damage done to the charts of the major averages and the New York averages are back down to their 50dma’s. It is hard to get to negative as there have been so many times in the last couple of years when it looked like there was going to be a real correction, only to see the market turn around and rally to new highs. One of the best examples of this was just a couple of months ago in October. It’s hard to know where things will go from here, but at this point protecting capital should be the primary issue. Jerry