Leaders Index 10-2-18

The market put in a pretty ugly session today. The Dow made a new high and all the talking heads on the business channels kept talking about it, but that is the least relevant of the widely followed averages. There was again negative action in the overall market. The Nasd averages were weakest again with the COMPQ and the NDX lower by .47% and .22% respectively. The SPX was off by only .04%. All the major averages finished at or near their intraday trading lows, a sign of a lack of support. Volume was higher across the board. This was enough to produce a new distribution day on the Nasd averages. The decline in the SPX was too small to qualify as distribution. Leading stocks had a very bad day. The leaders index declined 1.42% and closed low in its trading range. The index moved further below its 17dma and even tagged its 50dma. Volume on the leaders index was higher, showing that there was distribution in quality growth stocks as well. In addition the relative strength line of the leaders index has now broken below its 50dma. Today’s action was very disappointing. Leading stocks were hit hard and pretty much across the board. Many stocks that presented solid buying opportunities recently are rolling over and producing losses. In the IBD 50 today only five stocks were higher. There are some serious red flags out there. The new lows have easily beaten the new highs for days now. In addition the advance decline line has turned lower and is now presenting a significant divergence. Real damage has been done in the last few days. We are coming up on earnings season and good reports could spark another rally, but right now a good deal of caution is warranted. Jerry