Looking at a couple places where the downside started we note the Russell 2000 trying to be green for a 3rd day in a row and we note the Semiconductor index still holding the key identified support level, which has touch points dating back over a decide. In other words, it’s mucho significanto. Adding to the drama, the measurement off the Double Top pattern has been registered, so SOX is a candidate to bounce if it so chooses.
Checking back in on the view of a post-2012 leader, the semiconductors with a monthly chart of the SOX.
We had noted for months that the index was creeping up the top of the Bollinger Band for the first time since before its epic blow off in 1999. This month it is falling away from the top of the BB with the monthly EMA 10 right there as would-be support. If it were to drop to the middle of the BB however, that would constitute a test of the long-term breakout.
Dialing back to January of 2013, I am looking for clues about the coming phase for the economy, mostly as an input into whether or not I can think about turning bullish on gold again (here we remind you again of gold’s best investment case, which is counter not pro cyclical).
The answer, from a contact in the Semiconductor sector (AMAT, LRCX, MKSI, etc.) food chain was that the Semi equipment companies, which we called “canaries on the [economic] coal mine”, were ramping up and thus NFTRH’s view became bullish for the economy, at least short-term.
When this information was combined with the following chart of the Palladium-Gold ratio, which had proven a good economic backdrop indicator, the case for a firm economic phase was even stronger. Then followed a string of strong ISM data, a stabilizing ‘jobs’ picture and voila, here we are in Bull Party Central with trend followers everywhere looking good and touting to cement their reputations. But I digress…
Here is the monthly view of PALL-Gold showing that the economy may not be done yet, although the break above resistance (now support) is still very tentative…
The semiconductors have led the way. First in Q1 of 2013, when NFTRH subscribers were alerted that the semiconductor equipment companies were ramping up and then through the big long-term breakout in February of this year, the Semiconductor index has led the way.
In case #1 (the Semi equipment ramp) the implication was for a strengthening economy at a time when everyone thought otherwise. What happened? The canary in the coal mine chirped and the economy strengthened despite indignant emails I got to the contrary. All of this was against a media hysteria about the Fiscal Cliff with even a family member / financial adviser advising that the best and brightest fund managers were in cash (at Thanksgiving, 2012). Ha ha ha. “Bullish!” said I to the drop jawed family member. “Reeeealyyyy???” Ah yah, really.
The daily chart of the Semiconductor Index remains constructive above the 10 year breakout support line and now, with a rise above the 50 day moving average, is trying to get bullish again.
The green arrow shows a higher low and the red arrow shows a lower high. Ultimately, one of these parameters is going to break and send SOX off on its bullish or bearish way.
I may regret this but the rest of the Semiconductor items are now closed out. That includes SIMO, which delivered what I think is its first loss to me this morning. Also, EZchip went back to being not EZ.
SOX is still above support, but as of this moment it’s got a big ugly candle and I am not thrilled about what some other markets are doing (hello NDX, RUT). So cash is good for now.
The Nasdaq 100 has dropped to an obvious support level (50 day MA’s & lateral visual) from the top of a Reverse Symmetrical Triangle.
Other leadership indexes like the Russell 2000 (small caps) don’t look so hot either, and yet here stand the Semiconductors, with SOX still above the important breakout line and still doing its Bollinger Band creep routine.
Data came in weaker this morning with a home sales drop of 3.3% in February. The ‘all one market’ market is cheering to banish the evil spirits released by Janet Yellen last week. Those would be the rising short term interest rate spirits and they are key to our fundamentals.
Silicon Motion (SIMO) was sold on the pop and as it dutifully pulled back yesterday it was bought back. I don’t know, seemed like the thing to do. As long as SOX remains above that 10 year resistance line I’ll be constructive on these things, and the stock market too. Below the breakout line may be a handy stop on a trade like this.
Unlike people making a big deal about PDAC over the last few weeks (I really do not care what is going on in the world of small would-be miners, each with a pitch at the ready) I find freedom in being a macro market person who just happens to be a precious metals bull. That means when the precious metals are not happening (like this week’s expected reaction) I am able to literally deal in a world full of markets.
With a great big hat tip to an NFTRH subscriber (who seems to know exactly what I like in charts) the chart below shows my current Semiconductor holdings that are making a day like today in the precious metals a little easier to handle.