Leaders Index 1-3-20

The market got hit pretty hard at the open yesterday due to the drone strike in Iraq. The major averages gapped lower at the open, but put in their lows in the first five minutes of trading. They then regained much of the decline and then traded sideways most of the remainder of the session. It looked for a little while that the market might make a run for positive territory, but it didn’t happen. The declines were pretty evenly divided with the COMPQ and the NDX falling .79% and .88% respectively. The SPX declined .71%.The New York averages closed just above the midpoint of their intraday trading ranges while the Nasd averages finished either in the middle of their trading ranges or just below it. Volume was lower across the board, according to Esignal. It was lower by 9.79% on the Nasd and just 1.81% on the New York. The New York volume was very close and different data feeds could produce different results. This happened as IBD said volume was slightly higher on the New York and gave it a distribution day. Since the major averages were making new highs and the leaders index was lagging badly I decided to create a new index that is acting better and will be more useful in determining when an important top is being put into place. The index has 21 components in 15 different industry groups and I think provides a good cross section of top performing stocks right now. I have included a text file with the components of the new index. The index held up much better than the overall market as it declined only .16% on the day. It also closed high in its trading range on lower volume. The market actually acted fairly well yesterday. With the news there could have been an ugly decline, but what actually happened was pretty mild. The major averages recovered much of their early losses, and if it weren’t for the uncertainty over a weekend it might have done better. The charts of the major averages look ok and the damage was limited. The new leaders index is strong and has been riding its 9dma higher for a couple of months. It is a good combination of leading stocks and should provide a good warning when the market is really rolling over. The overall picture is still positive. In a weak market the damage done yesterday would have been more severe. We should look to see how the market trades next week. If it rebounds well then this is likely just a blip. If there is more shooting over in the middle east the market could face further weakness. Right now the damage done yesterday was limited and the uptrend appears intact. Jerry