That was about the fastest and most decisive failure of a follow through that I have ever seen. The market lost all of yesterday’s gains and more. Losses were widely distributed with the COMPQ and the NDX falling 3.02% and 3.08% respectively. The SPX lost 2.93%. All the major averages finished at or very near their intraday trading lows as there was consistent selling throughout the session. Volume was higher across the board, 10.83% on the New York and 6.34% on the Nasd. This was enough to produce a distribution day on all the major averages, on the day after the follow through. Leading stocks were slammed as well. After the follow through I made up a new leaders index last night. I will include it along with the old one for a few days. There is also a text file with the new index included. The new index fell 3.52% on the day. It tagged its 9dma at its lows and closed well above this moving average. The old index is still looking a lot better than the major averages. Volume was lower but still above average. The market was hit hard today at the open and sold off for the rest of the session. The higher volume showed that large institutional players were selling stocks today and a distribution day so soon after a follow through is usually fatal. A clear inversion of the yield curve, along with a little trade talk, provided the news stories that reversed yesterday’s rally. I think today’s action is more important than yesterday’s because a yield curve inversion is more important than the announcement of future tariffs that may not even happen. After breaking below their 50dma’s the major averages have now made two attempts to overcome this resistance but have been unable to. All the major averages are below their 50dma’s. The INDU and the NYA are below their 200dma’s. We have also had a cluster of Hindenburg Omen signals. There have been five in the last nine trading days. This is the kind of action that you see around important market tops. The market is clearly not acting well and is at some significant risk. We will likely see lower prices ahead. Jerry
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