Leaders Index 10-12-18

The market staged an anticipated bounce yesterday, but it contained both good and bad elements. The major averages opened with solid gains, but there was then selling and most of the gains were lost. Late buying say them recover most of the decline and all the major averages closed high in their trading ranges. Some of the secondary averages didn’t do as well. The Nasd averages were the strongest with the COMPQ and the NDX higher by 2.29% and 2.77% respectively. The SPX gained 1.42%. Volume was lower across the board, not what you want to see on a rebound after a sizable decline. Leading stocks showed gains as well with the leaders index rallying 1.44%. The index closed in about the middle of its trading range and volume was lower than Thursday but still well above average. The relative strength line of the index was about flat on the session. We were expecting a bounce and we got one yesterday. It looked during the day that the early gains would be lost, but late buying came in to support stocks. After a decline the quality of the bounce is critical. Yesterday’s bounce was ok but not particularly strong. The gains were much smaller than the previous losses and more important volume was much lower. This shows that the buying pressure yesterday was less than the selling pressure earlier in the week. Also most stocks have broken charts that will take some time to heal. Earnings season started in earnest yesterday and we will have to see how good the numbers are and more important how the market reacts to the earnings. There were some bank stocks results out yesterday that didn’t produce very good action in the stocks. The market is still in a precarious position and it will take more positive action with volume in the major averages and individual stocks to really improve the picture. Yesterday was a rally day and there could be a follow through as early as Wednesday, but that is probably not enough time to really turn things around. Jerry