Leaders Index 8-20

The market has had a pretty nasty sell off in the last week, and several of those days have been on strong volume. IBD and the MEM are both out of the market. After a sell off you need to watch the quality of the bounce. If it is strong with good volume the worst may be over, if not lower prices are likely ahead. We have not seen any hint of a bounce until today, and the session did not inspire a lot of confidence. The gains today were not strong. The New York averages closed well off their highs and the Dow sold off into the close and finished down on the day. Volume was higher on the New York averages but they closed well off the highs of the day and with fairly weak gains. The SPX lead the way with a gain of .38%. The COMPQ had a stronger rally of .68% and closed in the upper half of it’s trading range. However volume on the Nasd was lower on the day, showing little conviction among big players. Leading stocks had a better day than the overall market as the leaders index rose 1.94%, but the volume was lower than it has been in weeks. The index remains below it’s critical 17dma. For there to be any real confidence in this bounce attempt it would have to clear this moving average with conviction. We are at a point in the cycle where any decline could turn into something serious. We are in the fifth year of this cyclical bull and there have now been ten Hindenburg Omen signals since May 31. In this situation the odds that a decline will become serious is high. Until there is a strong bounce back with volume the side lines or mostly cash is the place to be. Jerry