The market put in a nasty reversal today. The Nasd averages were weak most of the session in a continuation of yesterday’s action. The New York averages were strong early but lost the gains and closed lower. Talk of a stalemate in stimulus talks late caused selling into the close. All the major averages finished at or very near the bottom of their intraday trading ranges. The Nasd averages were the weakest again with the COMPQ and the NDX losing 1.69% and 1.89% respectively. The SPX declined .80%. Volume was higher across the board. It gained 7.84% on the Nasd and 15.91% on the New York. This was enough for fresh distribution days on all the major averages. Leading stocks took another hit as well. The leaders index fell 1.50% on the session and closed low in its trading range. It continued below the important 17dma and volume was lower and below average. The relative strength line of the leaders index broke below its 50dma. Today’s action was disappointing. The Nasd averages continued their weaker action as there was selling in the big cap tech stocks. There was also selling in the broader Nasd, so it was not just a few big stocks. The action in quality growth stocks is a cause for concern. The leaders index has seen in the last week the worst break it has seen since the rally started. It is below its 17dma and the relative strength line has broken below its 50dma. This shows a clear loss of momentum in leading stocks. If it doesn’t reverse quickly it will be very negative. There are clear signs of rotation out of the Nasd stocks that have led the rally since it started. This is usually an important warning sign. There are more worrisome factors now than there have been since the rally started. If the major averages and the leaders index can’t recover quickly a more defensive posture will be called for. Jerry
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