Remember when you were a kid and played "follow the leader"? The leader would jump, run, and often do body contortions that you were supposed to repeat or get knocked out of the game.
The stock market also plays "follow the leader". In today's chart, we will show you our current Leadership Index Ratio. It measures how far Leader stocks are ahead of the Broad market stocks.
A positive Leadership stock ratio means that the "leaders" are out in front of the pack, and the followers are right behind them. A positive Leadership Ratio means that these stocks are leading the market upward in a rally.
When the Leadership Ratio goes negative, then the Leaders retreat from the game and the followers (Broad market stocks) also quit and leave the game. When this happens, stocks start down trending and pull back.
Check the chart below to see how the market rallies when the Leadership Stock Ratio is high and strong. Also note how the market pulls back when the Leaders retreat into negative territory.
(The Leadership Stock Ratio is just one of the market gauges that we post every day on our paid subscriber sites.)