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.
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.
The SOX Semiconductor index is unbroken and still on the potential market melt up/blow off plan. The daily chart shows the support critical to this plan.
RSI is fine above support, but the shaded area shows the level it dropped to in early February in case this ‘correction’ (so far just one big, scary candle) bites deeper as I suspect it will.
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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.
The SOX is dropping to the 10 year support line. We will now see what bulls are committed and what bulls are not as the market takes a moderately scary drop today.
For perspective (always a good thing), here is the monthly view again. It’s for all the marbles in the ‘will they or won’t they (blow off)?’ sweepstakes with regard to US stock markets.
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.
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.