The Interesting Thing About The SOX…
Wednesday Recap:
We had a
great day Wednesday with a $435 profit, or just over a 2% return on investment
in one day. Monday started with a gap higher right into resistance near 10550.
The market consolidated at this level, then busted ahead to test and ultimately
fail near the 10600 level. From here the market’s measure moved down on oil
concerns — a skitish reaction, to say the least. The Dow then tested support,
then bounced near the end of the day, ending up some 62 points to finish near
10550 — cutting in half earlier gains.
For its
part, the semiconductor index (SOX) kept the NASDAQ market strong. While the
SOX has been leading this market, it’s failure yesterday to close above its
200-day moving average is interesting. Further, the index has a history of
pulling back when it reaches 70 on the RSI, and that’s what’s currently
happening. We’ll watch this market-leading index tomorrow. Continued failure
at the 200-day moving average might be cause for some consolidation in this
index, which could lead to overall market weakness.
^next^
You’ll
recall that in our report last week on
Friday, November 11 the prediction said that 10 year note would come up and test the A level in the
chart below. The prediction said that when the 10-year note tested this
resistance it also might test 50 on the RSI. Below is the exact chart and
notations we posted last week with the addition of recent price action. As you
can see we’ve moved into the resistance region previously identified and we’re
testing 50 on the RSI. Now let’s see if the second part of this prediction
holds true: that this resistance holds, and the note moves back down. I think
there is a good chance this could happen.
Prediction for Thursday: The markets could touch both sides of the flat line on
Thursday. On the upside, if the cash Dow can move above and hold 10560 we could
see another test of 10600 in short order. If this breaks and holds we’ll see a
sprint to higher levels. However, if we don’t break out, sellers could take
control. On the downside I’ll first keep an eye on the 10525 level and then
again more significant support near 10500 – 10490. If this breaks and holds we
could see consolidation for a few days.
I’m also
going to watch the SOX index and the S+P’s tomorrow. A failure in the SOX could
pull all markets lower, and this would be confirmed by a test and failure of the
1176-75 level on the S+P. On the S+P, let’s also keep an eye on the SAR
indicator and 70 level on the RSI. This could provide the market support, yet
if broken might lead to further downside.
Portfolio
Strategy: Right now we are delta positive. We might get a little closer to
neutral if the market moves near 10600 or if market indicators start to weaken.
Having said that, it’s going to be hard to be a bear and fight the market trend
higher higher right now.