The market sold off yesterday, erasing most of Thursday’s gains. The major averages opened a bit lower, rallied briefly and then sold off for most of the remainder of the session. A little late buying saw the major averages finish off their absolute lows, but all closed low in their intraday trading ranges. The COMPQ and the NDX declined 1.50% and 1.41% respectively. The SPX fell 1.51%. Volume was lower across the board. It declined 10.31% on the Nasd and 9.13% on the New York. Leading stocks sold off as well with the leaders index declining 3.14% on the day. The index closed low in its trading range on lower and well below average volume. I have been saying recently that we could well get a follow through due to volatility. We got one on the SPX on Thursday as the gains that day were accompanied by higher volume on the New York, but lower volume on the Nasd. This is a poorly confirmed follow through and has a high probability of failing. The %E’s at the time of the follow through on Thursday were 39.4%, well above the top of the range to confirm. The weekly Coppock is in negative territory but it has a strong head of steam on the downside and will likely not be able to confirm anytime soon. There was also no Eureka signal. We could get one in the next week or so, but it would still be a poorly confirmed follow through. We missed a distribution day yesterday because volume was lower across the board. A distribution day right after a follow through is usually fatal. We will have to see if we get distribution in the next two days. The SPX did not undercut the lows of the follow through day yesterday so that is still in effect. The COMPQ did undercut the lows of Thursday but that index did not produce a follow through. Right now the chances that this follow through will be successful and produce a tradable rally are small. It will likely fail quickly. The major averages look like they are being turned back by the declining 20dma and will probably go back down and test the recent lows. We will have to see if those lows hold, although they will likely not and the major averages will move into new lows for this bear market. Jerry
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