What the Semis say about today’s market
Just a few quick
thoughts today. On Monday I will have the complete breakdown which I publish at
the end of each month.
The first chart is an update of the chart I
discussed in the
10-24 column.
As you can see, it appears the upper end of the
symmetrical channel has acted as resistance. So far it appears another leg down
is beginning. While it’s not too late for the market to mount a high-volume
rally and break this pattern, it appears the path of least resistance is down.
Since the 10/18 close which preceded last
Wednesday’s strong up day,
(
QQQQ |
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Chart |
News |
PowerRating) has been one of the strongest major ETF’s.
It has risen nearly 2.4%. Meanwhile,
(
SMH |
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Chart |
News |
PowerRating) has been one of the worst
performing and has actually fallen 0.25%. Below is a weekly chart of both the
Nasdaq 100 and the Semis. As you’ll notice, divergences of this type don’t tend
to last long. If the bulls are going to have a chance, the Semis better get in
gear.
(
TLT |
Quote |
Chart |
News |
PowerRating) has sold off very hard the last three
days. This morning it gapped to a six month low and continued to sell off
throughout the day. Bond prices are falling. Rising interest rates are not good
for stocks. Watch out if this doesn’t reverse.
Institutions tend to mark up the market towards
the end of the month. This is especially true in October, since it is year-end
for many mutual funds. This should help to prop up the market over the next few
days. If it doesn’t, things could get even worse in November.
The S&P has failed right at its 200-day moving
average. Based on the higher volume we’ve seen the last two days it appears
institutions were using this move to the 200 as an opportunity to liquidate
positions. Not good.
Caution remains the key word. The next few days
look very uncertain. The next few weeks could get downright ugly if some
institutional buying doesn’t appear. If you don’t see highly favorable trading
opportunities, wait until they appear. Don’t press it.
Best of luck with your trading,
Rob Hanna
For those who may be looking to expand their
knowledge beyond just market timing, my
Hanna ETF Money Flow System utilizes the VIX in generating trading
signals for spread trades.
Rob Hanna is the principal of a money
management firm located in Massachusetts. He has spent the last several years
developing and refining methods for trading in stocks across multiple time
frames. He selects stocks using both fundamental and technical criteria, and
then trades them using technical analysis techniques.