Leaders Index 5-17-19

The market put in a negative session overall yesterday. The major averages opened lower, but then staged a rally into nicely positive territory. That didn’t last long as selling came in and drove the major averages to losses. All the major averages closed at or very near their intraday trading lows, a sign of weakness. The Nasd averages led the way lower with the COMPQ and the NDX declining 1.04% and 1.01% respectively. The SPX lost .58%. Volume was mixed. It was higher by .96% on the Nasd and lower by 3.51% on the New York, according to Esignal. This showed distribution in the Nasd averages. Leading stocks were lower as well with the leaders index falling 2.39% on the day. The index closed near the bottom of its trading range and fell back below its 50dma. The relative strength line of the leaders index also broke back below its 50dma. Volume was lower but still above average. The action of the market yesterday was disappointing. On Thursday the major averages and the leaders index regained their important 50dma’s on higher volume. This looked very positive. Yesterday they broke back below this important moving average, with higher volume on the Nasd averages. This is very negative. When a stock or a major average overcomes an important resistance level and can’t hold it then lower prices are usually ahead. The higher volume on the Nasd also showed that large institutional players were selling stocks, particularly quality growth stocks. We have seen something in recent days we have not seen in a while. There have been four Hindenburg Omen signals in the last seven trading sessions. This qualifies as a cluster and is a big red flag. The Hindenburg is a blunt instrument and does not give precise timing signals, but this type of action usually occurs in the area of important market tops. They can occur before, sometimes well before, a top but past clusters have occurred before meaningful declines. We will have to see how this plays out, but preserving capital is the most important consideration right now. Jerry