It didn’t work out the way the market was expecting. Over the last four trading sessions the market rallied based on hopes that the inflation numbers would moderate. It didn’t happen. The actual numbers were higher than expected and the market sold off hard. All the major averages gapped lower at the open and it was all downhill from there. With all the major averages finishing near their intraday trading lows. The Nasd averages took the worst of it with the COMPQ and the NDX falling 5.16% and 5.54% respectively. The SPX fell 4.32%. Volume spiked across the board. It gained 22.46% on the Nasd and 11.70% on the New York. This produced a new distribution day on all the major averages. Leading stocks were lower but held up better than the overall market. The leaders index fell 1.77% on the day. It closed low in its trading range on higher and just slightly below average volume. There were several encouraging signs in the market as it advanced for four days on hopes of a modest inflation figure. The number came in higher than expected and most of the gains of the last four days were lost. The market suffered large losses in much higher volume, showing that large institutional players were selling stocks heavily today. This is in contrast to the low volume on the recent rally days. There is little reason to believe that inflation will moderate soon and the Fed is now poised for more large rate increases. The lows of last week will likely provide little support and the next stop is probably the June lows. Bear market rallies are usually very tempting and suck in a lot of people, but they end up being very expensive. The current down leg of the bear market will likely continue now. Jerry
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