- Bearish Sentiment Crashes –B.I.G.
- How Much Deleveraging Has Happened? –Conversable Economist
- Hunting for Global Value –Dr. Ed
- Another Disappointing Retail Sales Report –Bloomberg
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.
Here is the monthly chart of the Semiconductor index (SOX), updated. Still thinking about a bounce in the 540 o 550 range, but I think odds are it is going to the mid 400’s sooner rather than later.
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.