Leaders Index 10-11-18

The selloff continued today with the market opening lower and working its way down most of the session. There was an attempt at a rally not long after the open, but it didn’t last. The major averages all suffered significant losses with the New York averages taking the worst of it for a change. The COMPQ and the NDX declined by 1.25% and 1.14% respectively. The SPX fell by 2.06%. All the major averages closed low in their intraday trading ranges, showing that there was not much buying interest as prices continued to fall. Volume was higher across the board and well above average. This means that large institutional players were selling stocks pretty heavily. Leading stocks continued to decline with the leaders index falling 1.69%. The index closed near the bottom of its trading range, just like the major averages. Volume was not as high as yesterday, but it was above average and very heavy. The index continued to move further below its 50dma and closer to its 200dma. It is clearly broken. The market is acting really badly right now. Despite the strong recent decline the market has been unable to show any kind of bounce. A market that can’t bounce after a strong decline is likely headed lower. All the major averages are now below their respective 200dma’s. This is very negative action and is usually associated with bear markets. There have been many times in the last couple of years that the market looked like it would go into a serious decline only to turn around and rally to new highs. This time the picture looks more negative. The main difference this time is rising interest rates. There are also signs that liquidity in the system is declining, not a favorable development for any of the markets. Most corrections are contained at the 8% level and are considered minor to moderate corrections. When this level is breached the odds increase dramatically that the correction will go on to intermediate term levels of about 12%. It could go even farther and produce a bear market, meaning a correction of 20% or more. The SPX is currently down almost 7.25% while the COMPQ is down just shy of 10%. The market is probably a little extended to the downside in the short term so some kind of bounce it probably in the cards, but right now the beach is a good place to be. Jerry