The Semi’s have been very helpful to me in navigating the macro economic and market environment since I found out in January that their business had perked up. I’ll be interested to see if AMAT and LRCX can hold above the 50 day moving averages and if so, if the lesser likes of MKSI and BRKS can play some catch up.
I own some MKSI for a trade on a short leash as defined by the support level just below the current price.
There is the positive divergence by SOX leading the SPX (top panel) and there is the negative divergence by the Banks (BKX-SPX ratio, bottom).
So, which one is right? Or are they both right with the Semi’s actually getting a very early head start while the Banks indicate a final dunk for the broad US stock market?
New orders at the semiconductor capital equipment companies (AKA ‘Canaries in a coal mine’ like AMAT, LRCX, MKSI, etc.) that I became aware of in January prompted the view that the economy was not going to hell in a hand basket in the wake of the Fiscal Cliff Kabuki dance.
But today as I am expecting the S&P 500 to make a final drop toward 1550 short-term I wonder if the the SOX, which seems to be trying to screw up a perfectly good bearish plan is not actually starting to confirm the intermediate term plan. That would be for a potential new stock market rally leg extending into 2014.
Above is a look at 4 of our canaries, daddy canary (AMAT), mommy (LRCX) and the two little canaries, MKSI and BRKS. Mommy and daddy have broken back upward above the EMA 50′s, leaving the littler ones looking constructive to hold support.
The equipment stocks had a pretty good turn down and I wonder if the regular market could finish its correction while the semiconductors provide an early window to a coming rally. I would love to see the S&P 500 hit the mid 1500′s and test massive support. Regardless, if semis’s continue bullish and the market starts to follow the semi’s upward now I’ll take a loss on the SPY puts and move on.
Meanwhile, aside from the SOX, none of the other indexes in our ongoing ‘Bear Flags’ posts have proven much of anything. Just a meandering ‘what if’ post for you to consider as we await the market’s next moves.
A couple of leaders, the Small Caps and the Semi’s are setting up to instruct about whether this rebound attempt is going to be real or Memorex.
Russell 2000 & Semiconductor Index, daily
I’d say the chart is self-explanatory to the point where the blogger does not need to blab on about anything.
Well, according to this chart it is… so I bought it back after selling ‘too soon’.
And according to this gentleman at SeekingAlpha (one of the relative few very worthwhile writers over there IMO) it is an opportunity fundamentally as well.
I am tucking this in a nice little group of tech stocks I have been picking up on opportunities like this. Another thing I like about this trade is the very clear line below which risk can be managed.
Here is the progress another leader is making toward a well defined target.
On Monday I put up a chart of the junk bond fund HYG, showing an impulsive drop in that garbage with the implication that speculative urges were bleeding out of the market. Then I looked at the same chart later and they had magically fixed it. There never was a decline… April Fools! Seriously, what was up with that?
Well, let’s see if they can paint the SOX.
SOX daily, click for full size
This chart sucks.