The Semiconductor index is bearish on daily and weekly views…
Further to the negative fundamental discussion about the Semi Equipment sector and the negative to neutral discussion about the SOX long-term technical situation, here is the view of SOX on a shorter-term daily and weekly basis.
I expect the chart jockeys who fell all over themselves in December to get bullish the Semis are now getting ready to help guide us through an H&S pattern and its downside targets. I’ll save them the trouble; the pattern measures 605 and handily enough there is a gap down there that can be filled.
The weekly gets even dicier. You can see it losing current support. If that holds up the next stop would be the 605 area noted above (shaded on the weekly), but the date with the neckline we talked about in the previous post is what I meant by noting people would start talking about an H&S and downside potentials. 540 to 560 (a long-term breakout point) is going to decide whether the Semiconductor index is going to make the big upside projections of the breakout or fail miserably as current degenerating fundamentals seem to imply. If it fails, there’s the measurement.
FWIW, I covered a leveraged short against the NDX this morning, but added another Semi equipment name short. It feels right to look into sectors now and discriminate.
Reason number 1,698,274 why when some chart guy talks in grave tones about a DEATH CROSS (of the MA 50 below the MA 200) having any lasting impact you should run, not walk the other way… quickly. This one actually was pretty well in alignment with the Semiconductor index’s mini crash, but if you look at the Dow, SPX or NDX you see that the signal came either right when it was time to buy or after.
The target on the SOX has been 700 or higher. I am still long (SMH) as the sector led the way down and has been leading the way up on the bounce.  Taking the profit on SMH and using part of those funds for an individual Semi stock speculation.
Well, look who’s back in his leadership channel. The Semiconductor index, which led the recent market turmoil, is back up into the post-2012 channel. We noted this over the weekend in NFTRH 359 and the leadership status is only firmer now.
“I would like to close the segment with a nod to the bull case. The SOX has been a great market leader. It led the extent of the post-2012 bull cycle and it led the recent mini-crash. As a point of consideration, SOX-SPX bounced during last week’s bearish broad market activity. In fact, it bounced right back up into its former leadership channel. This is now back on radar as an inter-market indicator. It is supportive of a resumed bounce.”
As for nominal SOX, NFTRH 359 noted [chart omitted]…
“Nominal daily SOX has gotten resisted by the mid Bollinger (MA 20) on each bounce attempt, but MACD is triggered and the gap is filled. The bounce is intact.”
In NFTRH 351 we had an extensive look at the Semi sector including its nominal technicals, its market leadership status and a potential setup that could be in play if my read on its fundamentals proves out. FWIW, here is the status of the Semiconductor sector’s leadership.
Since Q4 2012 SOX has led the S&P 500, which makes sense since Q1 2013 was when we became alerted to the Semi Equipment sector’s ramp up (which in turn was an early economic signal). 3 times since the circus last October centered around Microchip Semi’s outlook brain fart SOX’ leadership became over done and now the question is, has it been over done to the downside yet again?
All trends end sometime, but as of now this one is completely intact.
Per this chart created several months ago, the Semi index hit the first target of 750 on June 1. I had not even realized it. “Essentially in the books” is now IN the books. Way before the Semi’s recently started gaining the M&A hype in the media NFTRH highlighted the sector for a coming bullish phase (January 2013) for fundamental reasons, and then in early 2014 when the big breakout came we added technical oomph to the case.
Dutifully, SOX has been pulling back, which is a good thing since I did my selling and am without exposure. I have my eye on some buy targets for a few items, which were mentioned in NFTRH 346. They are stocks that have been mentioned here as well at various times. As for the sector, SOX is completely unbroken.
Hey, I like Dr. Seuss.
The Semiconductors, which has been my favorite sector both for trading and for market indications (with the Biotech a close second) is merrily on its way to the 750 target. This chart and its target were created as the Semiconductor index was consolidating a ‘Handle’ out of the ridiculous October hysterics (cue Microchip Semi with its idiot management… ‘errr, we are a bellwether and we see a Semi slow down’… FF 2 mos… ‘oh, never mind, business is great!’). Amazingly, there are only 20 points to target.
The Russell 2000 obviously has an ugly topping pattern. It has long since nudged to a lower low to the August low and now has eased below March and January. If it holds below the line this thing will be in a bear trend. The bears should hope that TA geniuses do not come out and blow horn the DEATH CROSS!!! of the MA’s 50 and 200, which is a Red Herring. The chart is bearish enough without the help of that hype.
Anyway, RUT was a leader to the upside on this most intense bull market phase, which has been the post-2012 period and that leader is starting to lose its bull market.
Continue reading Market Leaders Abdicating
Frankly, by daily charts I think the Semiconductor index and several other US markets are too far above the 50 day moving averages and soon due for a breather. But a big picture signal we first noted in March continues apace. That would be the SOX similarity (Bollinger Band creep) to its state in 1999.
Per the chart’s question, SOX did indeed close March (and April and May) above decade-old resistance and it continues to creep up along the top B Band. This and the Tranny can be considered Gate Keepers to the potential for a manic market blow off.
Time for bulls to get out their Gox Box Sox because the Semiconductor index is negatively diverging and having an issue at the 50 day moving averages.