Leaders Index 1-29-14

[Jerry Samet]

The market took another hit today after a large interest rate hike in Turkey and then did not react well to the Fed announcement. All the major averages gapped down at the open and after a small rally attempt sold off into the close to finish the session at or near their intraday lows. The COMPQ lead the way down with a loss of 1.14% and the SPY was close behind, falling 1.02%. Volume was higher across the board and above average on the Nasd, so there was distribution on all the major averages. The COMPQ fell back below it’s 50dma while the New York averages fell further below theirs. This continued the pattern of high volume declines followed by lower volume rebounds. Leading stocks sold off as well with the leaders index falling 1.71% on higher and well above average volume. The index tagged it’s 50dma for the third day in a row but closed above it. When an index hits an important moving average to many times it usually ends up breaking below it. We are clearly in a correction now, and IBD went to market in correction. Research has shown that the vast majority of corrections are contained at the eight percent level. This would be 3906 on the COMPQ and 1702 on the SPY. If they go below this level an intermediate correction or worse is likely in the cards. Jerry