Leaders Index 8-14

The market opened weak today and after a feeble rally attempt the major averages sold off into the close. They finished at their intraday lows with the COMPQ losing .41% and the SPY dropping .52%. Volume declined across the board, but it was a very small decline. This avoided another distribution day on the major averages. Leading stocks got hit worse than the overall market as the leaders index fell 1.97% on much heavier and well above average volume. The index broke below it’s critical moving average with conviction, which is a very negative sign. Both the major averages and quality stocks are struggling and have been for several weeks. The very high number of distribution days is a big red flag and one more will take the MEM to zero with the buy switch off and will likely cause IBD to go to market in correction. We are very late in the current cyclical bull market and the odds that any correction will turn into something serious is high. We have had two Hindenburg signals in the last two days, and this brings the total to ten since the first one hit on May 31. Evidence is growing that the market is in an important topping process. Major topping processes can be spread out over a period of months, so even if it doesn’t break immediately the top is either in or close. Caution is the word of the day now and new buys, if they are made at all, should be done carefully. I will be away for a few days. The updates will resume on Tuesday. Jerry