My Focus Is On These Three Sectors

  • October 3, 2003
  • Derrick Hobbs

Boy,
October is already here. Crisp air, erratic market movement, and Post
Season baseball action. I have to admit this is my favorite time of year. Let’s
elaborate a bit on this market movement. In fact I want to focus on three market
sectors tonight: Semiconductors, Banks, and Gold.

First, Semis
(
$SOX.X |
Quote |
Chart |
News |
PowerRating)).
Monday I highlighted this sector and we had a pattern in place that was setting
up for a nice tradable bounce to the upside. Four days into the pattern, you can
see that little two-step into Fib price support worked out quite well. However,
based on what I see here and in other indices/charts, this was a fast/sharp
snapback rally in what looks like the beginnings of an intermediate corrective
move that is developing. Actually, we’ve been in correction or “pause” mode
since Sept. 9th in this sector.

Bottom line: the SOX just put
in a 36 pt rally or 9% over the last three sessions. This is
SYMMETRICAL with the previous rally so I’m ready to
book profits and tighten stops on longs here. For you aggressive types, this is
the zone to consider looking for shorts in this sector as well.


image src=”https://tradingmarkets.com/media/2003/Derrik/dh100303-03.gif” width=”573″ height=”593″ />

Next, we have the Bank Index
(
$BKX.X |
Quote |
Chart |
News |
PowerRating). This index looks
like it made a “Last Gasp” to the upside today and closing near the lows of the
session. Two Bearish Patterns are complete on this daily chart. So, I’m not
excited about prospects on the long side in banks until this price resistance
zone is broken to the upside. Otherwise, Banks look to be susceptible to some
downside movement.


image src=”https://tradingmarkets.com/media/2003/Derrik/dh100303-01.gif” width=”576″ height=”595″ />

And finally, Gold. Oh that precious yellow metal is creating

havoc again. December Gold (GC03Z) is down
almost $28 per oz. over the last six trading sessions. In fact, when you look at
the Gold Bugs Index (the non-hedged gold
companies) there is an interesting technical picture to be painted here.

  1. This stock has
    tracked nicely along a 2 std deviation regression channel. Since 2001 it has
    only gone out of this channel twice. Once back in June 2002 and second
    time…right now. The last time it stuck its head above the channel it got
    whacked for a 40% decline. Well, pull out the baseball bats folks cause it
    looks like it might get whacked again. That’s what you call “Good Wood”.

  2. To
    compound the pressure on Gold
    Stocks, we have a Bearish Butterfly pattern that has printed and is in full
    swing for a short trade. The objective on this pattern is 150-160 which is
    30-40 points lower than today’s levels. That index is fueled by stocks like
    Newmont Mining
    (
    NEM |
    Quote |
    Chart |
    News |
    PowerRating)    ,
    Gold Corp
    (
    GG |
    Quote |
    Chart |
    News |
    PowerRating)    , and
    Harmony
    (
    HMY |
    Quote |
    Chart |
    News |
    PowerRating)    .

So my conclusion on this sector is that I wouldn’t be holding
on to longs right now unless I’m comfortable with a decline of the magnitude I
just mentioned. On the flipside, I would be interested in shorting pullbacks in
this area right now.

image src=”https://tradingmarkets.com/media/2003/Derrik/dh100303-02.gif” width=”573″ height=”593″ />

Lotsa love goin’ out to my techie Dan Pacheco for getting my
computer fixed this afternoon. Otherwise this report never would have been!

Have a great weekend all….Go Cubs!

Derrik Hobbs