Leaders Index 2-16-18

The market put in a mixed performance on Friday. The major averages opened higher and were staging a mild advance early. About half way into the trading day the major averages topped out and spent the rest of the day selling off. All the major averages closed the session at or very near their intraday trading lows. The early gains and weak close are not what you want to see. The COMPQ finished with a loss of .23% while the SPX was slightly higher by .04%. There were some issues with volume on Friday. The Volume on the Nasd was clearly lower. This allowed the Nasd averages to avoid a distribution day. Esignal and Marketsmith showed New York volume clearly higher. IBD uses consolidated New York volume and that came in very slightly lower. The fact that the SPX closed at the bottom of its trading range but slightly positive along with higher volume would constitute a stall day on the SPX. The definition of a stall day says that volume higher or within 95% of the previous days level would be stalling, so either way it was a stall day on the SPX and the first distribution day on the New York averages since the follow through day last week. Leading stocks were generally weaker on Friday with the leaders index falling 1.82% and closing near the bottom of its trading range. Volume on the leaders index was lower than Thursday so there was no distribution on the leaders index. The chart of the index still looks solid. Friday’s action was not encouraging. A distribution day so soon after a follow through increases the odds that the follow through will fail. We saw distribution on the SPX three days after the follow through. We also have not gotten a Eureka signal so far in this rally attempt. We could still get one next week and have this indicator confirm the FTD, but for now only one of the three indicators we use to confirm follow throughs has given a green light. The low level of confirmation and distribution on three days after the follow through are saying that this new rally attempt should be treated with a good degree of caution. It may well succeed and produce a tradable rally and taking some positions is justified, but some care should be exercised before getting to heavily invested until the rally attempt proves itself, mostly by the major averages moving into new high ground. Jerry