Leaders Index 7-31-20

The market put in a solid session yesterday after a series of strong earnings reports from large cap tech stocks. The major averages opened higher, but during trading virtually all of the gains were lost. It looked like there would be a negative reversal, but in the last hour or so the market rallied back to solid gains. All the major averages finished at or very near their intraday trading highs, showing support into the close. The Nasd averages led the way with the COMPQ and NDX gaining 1.49% and 1.78% respectively. The SPX rallied .77%. There was weakness in small and mid-cap stocks, along with semiconductors, as the action was in the big cap tech stocks. Volume was higher across the board. It gained 7.88% on the New York and 3.35% on the Nasd. This shows that large institutional players were buying stocks. Leading stocks were stronger as well with the leaders index gaining 1.28% on the day. The index closed near the top of its trading range and it broke above its recent basing pattern. Volume was higher and above average. The market acted well yesterday after a series of strong earnings reports from four large cap tech companies. After a strong open the gains were lost and it looked like there would be a negative reversal. Buying came in near the close and the major averages rallied back to their highs. Higher volume across the board showed conviction as large institutional players were buying stocks. The gains were fairly narrowly concentrated as market internals were weak. This tends to happen late in a rally as the advance gets narrower. Overall it was a positive session. The leaders index broke above its recent consolidation on high volume to make a new high. The relative strength line of the leaders index didn’t quite make a new high but it is right there. Any more strength will move it to new highs. The major averages are right below their recent highs and any more strength will move them past their recent highs. Yesterday’s action was encouraging. The rally may be getting a little long in the tooth and the weakness in the general market is the kind of thing you see late in a move. The advance tends to get narrower as it moves higher. The fact that the leaders index broke into new high ground on a base breakout on high volume is encouraging. The market rarely gets into serious trouble when quality growth stocks are doing well. Overall the picture looks positive and we should see higher prices ahead, at least in the short term. Jerry