After a flat opening today the market staged a rally in the first couple of hours. The major averages then reversed again and sold off into the close. They all closed at the lows of the session with the COMPQ off .63% and the SPY down .51%. Volume was higher across the board by a considerable amount, which showed that there was real selling pressure. This also added a distribution day on all the major averages. Leading stocks got hit a lot worse than the over all market as the leaders index fell 2.41% on about unchanged volume. This was a substantial drop and the index is now below the important 17dma. The damage was widespread as many stocks in the index were down by multiple percentage point amounts. The index has also now completely closed the gap up of 3/4 and is back in the consolidation it was in before the powerful breakout on that date. It is a bad sign when breakouts fail. The major averages have been acting poorly in the last few days with reversals and closes at or near their lows. Despite this if you look at the charts they have not suffered real damage yet. Leading stocks are a different story. They have been hit pretty hard and may well lead the market down. It has been tough calling tops in the last year as QE has prevented any meaningful declines, but the market averages and quality stocks have come under stress in the last week and red flags are showing up. If they both don’t rebound quickly and with conviction it may be a good idea to raise some cash. Jerry