The market sold off yesterday after Thursday’s rally. The major averages opened lower and spent most of the session working their way down. All the major averages finished near the bottom of their intraday trading ranges. The Nasd averages were the weakest with the COMPQ and the NDX losing 2.47% and 2.67% respectively. The SPX declined 1.63%. Volume was lower across the board. It fell 8.42% on the Nasd and 16.74% on the New York. Leading stocks outperformed the overall market with the leaders index gaining 2.26% on the day. The index closed high in its trading range on lower and below average volume. The market couldn’t build on Thursday’s gains and ended up losing most of them. The market has been trying to rally here but doesn’t seem to be able to get a head of steam going. This is negative as a market that can’t rally usually goes lower. There were two good signs yesterday. Volume was lower so there was not a new distribution day. Also leading stocks are outperforming in the last few days. The leaders index made a new high yesterday on both a price and a relative strength basis. It has now recovered all the losses from the big down day on 5/31. The problem is that there have been three up days in a row on successively lower volume. It this continues it will produce a wedging pattern that is negative. The market seems unable to get much going on the upside. If this continues it will likely lead to lower prices as a market that can’t rally is usually a market that is going lower. Unless we get some solid upside action quickly the selloff will probably resume. Jerry
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