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.
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.
The US stock market is negative pre-open, but don’t be surprised if we get a strong bounce soon. It could be a trade-able bounce. I have bought a couple items in anticipation and am watching several more.
A bounce is a bounce; a trade. It is what happens on a would-be bounce that will be important going forward. What will the market do at resistance? That will tell us a lot about what this thus far mini correction will be, another quickie or something more lasting.
SPX has firm support at around 1800.
One of the leaders, NDX needs to bottom shortly and make a ‘higher low’ to February or it is going to activate a bearish intermediate signal.
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The reversal in US markets is coming after a period of under performance by large tech stocks and the momentum darlings like YELP, FB, TSLA, and of course, my personal whipping boys, the 3D Printers.
The Semiconductor index made a bearish engulfing candle after making a new high a couple days ago.
I shot first and didn’t ask questions, selling the Semi’s and in particular Silicon Motion (below) on the drop below former support (now resistance) and now going to long SIMO again with the 50 day moving averages as a tolerance line.
1+ years ago… that was when we became alerted to the positive projections in the Semiconductor equipment sector, which meant that Semiconductor companies were ramping new inventory builds. This had positive implications for manufacturing as a whole since the Semi’s are a canary in the coal mine.
Today the canary is at critical long term resistance. That is all; no grand statements about what it is going to do or not do. But we can say that if resistance holds a bear case on the markets and the economy will probably gain an ally. If it breaks out, the measurements are noted.