Leaders Index 3-26-18

The market staged a bounce back rally today, at least on a price basis. The market gapped higher at the open on news that there might be some negotiations with China on trade. The major averages saw their early highs within the first fifteen minutes of trading and started selling off. It looked like the early gains would be lost. A little more than an hour and a half later a rally started and the major averages moved higher into the close. The COMPQ was higher by 3.26% while the SPX gained 2.72%. All the major averages closed at their intraday trading highs, a positive sign. Volume was the problem. It was lower across the board and at or below average on both exchanges, a negative sign. Leading stocks had a good day as well with the leaders index rallying 3.76% on the day. The index closed at its high of the session and was just below its important 17dma resistance level. Volume on the index was lower and below average, just like the major averages. The market, again reacting to news on trade, staged a strong rally from an oversold condition. At least on a price basis. The real problem here was volume. It was lower than Friday’s level, and in fact lower than the volume on either last Thursday’s or Friday’s declines. You want to see higher volume on a rebound after a sell off. That didn’t happen today. It shows that large institutional players were not in there buying today’s rally. Experienced market operators know that in history the largest single day point gains in the major averages have occurred in bear markets. It is impossible to know now if that is the case currently as only time will tell if that is true. The lack of volume today is very negative as you want to see higher volume on the rally days than the selloff days. If there is to be a real move higher now the next hurdle for the major averages is to break above their respective 50 day moving averages and the leaders index to overcome its 17dma. This must happen with some real conviction to improve the picture. Jerry