After an big sell off like we had on Thursday you look to the quality of the bounce in an effort to determine if the worst is over. Yesterday’s action did little to indicate that to be the case. There was a fairly weak rally early that didn’t hold. The major averages sold off late in the session and all closed low in their intraday trading ranges. The COMPQ finished lower by .09% while the SPX declined .18%. Volume was mixed, slightly lower on the Nasd and higher on the New York. There was no new distribution today as the declines in the major averages were too small. Leading stocks did better than the overall market as the leaders index close the session higher by 1.29%. The index closed in the lower half of its trading range, but held above the short term 9dma support level. The relative strength line of the index made a new high. Yesterday’s action has to be considered negative. After a big decline you want to see a strong bounce on good volume to show that the worst is over. That did not happen. The action yesterday has to be considered weak. The market could not hold even moderate early gains which is very negative. All the major averages are trading below their important 50dma’s, which is not indicative of a healthy market. About the only positive thing you can look at right now is the action of quality growth stocks as seen in the leaders index. It is holding up well and staying above all its short term support levels. However if the market continues weak that could change quickly. Right now the preponderance of evidence points to further weakness, but as we have seen in recent years in a QE environment declines can be short lived and the market can rebound quickly. Jerry
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