Has This Sector Topped Out?
On top of the fact the DOW and S&P failed their
recent breakouts…on top of the fact that the NASDAQ/NASDAQ 100 continue to
lag badly…on top of the fact interest rates just broke out above
intermediate term resistance…on top of the fact that BIOTECHS are toast…on
top of the fact INTERNETS have croaked…I now have a few more warning signs
coming from the action this market.
The one area of the NASDAQ that has been working
well is the all-important SEMICONDUCTORS. I think there is a better than
average chance that the SEMICONDUCTORS have now topped as the SOX could not
get above 450 and INTEL was sold off on “supposed” good news. This would fit
in well with something else I have been seeing. Every ANALyst…except one,
has turned bullish on the group over the past few weeks. In fact, they seem to
be jumping over each other with their upgrades. Let me be clear. They are
never right. For whatever reason, they have turned bullish at the tops and
bearish at the bottoms as long as I have been following them.
The NASDAQ/NASDAQ 100 and the RUSSELL 2000 are now
sitting on their uptrend lines going back to August 04. We are talking goal
line here and a goal line stand needs to be made.
The NEW LOW LIST is picking up. In fact, the
NASDAQ had its highest number Friday since last August.
The NEW HIGH LIST has contracted measurably.
This is the same type of action I saw in early 04
that led to a 10% drop in the NYSE and 20% in the NASDAQ…but we are now
farther along in the cycle. At the very least, you should know that the
NASDAQ-types are in big trouble here. A break of the trendlines would be a
negative but even worse would be a break through recent lows. If that occurs,
I could safely tell you there is an air pocket underneath as there is not a
lot of support. Watch the 1480 and 2008 support areas for the NDX and the
NASDAQ respectively…and if there are gains to be had in the market, I expect
the lionshare to remain with the NYSE.Â
All in all, I believe there are many
technical negatives building up underneath the surface of a strong
NYSE…which has been led by COMMODITY-types. The market is far past the point
where you will be bailed out of mistakes. This game is going to remain tough.
Gary Kaltbaum