Leaders Index 12-30-19

The market sold off fairly hard today. The major averages opened lower and after a rally attempt sold off again. All the major averages finished low in their intraday trading ranges, showing little support as prices fell. The Nasd averages were hit a little harder with the COMPQ and the NDX off by .67% and .70% respectively. The SPX fell .58%. Volume was higher across the board. It gained 12.76% on the Nasd and 28.83% on the New York. This was enough to produce a fresh distribution day on all the major averages. Leading stocks sold off as well with the leaders index dropping .57%, about in line with the overall market. The index closed in the upper half of its trading range. It is below its short term 9dma but right on its 17dma. Volume was a bit lower than Friday and well below average. The market put in its first real decline in couple of weeks. The major averages tried to rally off the lows of the session, but ran into trouble. The biggest negative today was the strong volume. You would prefer to see lower volume on a decline. This shows that large institutional players were selling stocks today. The rally had gotten a little stretched with several short term indicators flashing warning signs. I said in my last update that the A’s minus E’s had turned down on Friday and there is distribution under the surface. We are due for a pullback after the recent advance. Now we must watch carefully for any signs that this could turn into something bigger, such an intermediate term correction that would put an end to the intermediate term advance we have been in. Right now I don’t see any real signs that this is occurring. I am going to watch the weekly Coppock to see if it starts to slow its up move and put in a curl on the chart. So far this hasn’t happened. The market put in a very strong rally this past year. Most of the move occurred in the first four months of the year and the last two or three months. If you look at the Presidential election cycle the year before the election is the strongest. We have just had that, but the year of the election is the next strongest. Currently it looks like it is unlikely that the Fed and the rest of the government would allow a major correction before the election, but events can always get in the way. Many are coming out with forecasts for next year, as they always do. Most are little more than educated(or uneducated) guesses. My prediction is the same as it always is. I don’t know. The best way I have found to deal with this is to use the three road scenario, developed by my friend Ian Woodward. You say what would the market look like if there is a bullish advance, and write those factors down. You then look at the chart again and say what would this look like in a bearish scenario, and write that down. The middle road is basically a flat market. You then let the market tell you which will come about. There will be no update tomorrow. I hope everyone has a happy and profitable new year. Jerry