Pay Attention To These 2 Semis

  • February 2, 2004
  • Gary Kaltbaum

While
the market did succumb to a bit of distribution last week, I
am not sweating it just yet. A couple of days of professional selling is something
to watch, but not something to get jumpy about…just yet.

BUT…there are a few things to talk about.

TRANSPORTS broke down badly last week on the back
of poor action in the AIRLINES and TRUCKERS.
Since when have AIRLINES and TRUCKERS led the market? Never…so no biggie unless
you are a big holder of
(
YELL |
Quote |
Chart |
News |
PowerRating) and
(
JBLU |
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News |
PowerRating).

SEMIS are still worrying me. While most stocks in the group do not look like

(
LRCX |
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Chart |
News |
PowerRating) and
(
NVLS |
Quote |
Chart |
News |
PowerRating), these charts should scare you because the SEMIS
have been great forecasters of the market.

image src=”https://tradingmarkets.com/media/2004/Kaltbaum/gk020204-01.gif” />

image src=”https://tradingmarkets.com/media/2004/Kaltbaum/gk020204-02.gif” />

I am finding more shortable names now than in the past nine months. This tells
me the market is most definitely gettting more selective and that it is going
to become more difficult going forward. This is somewhat of a normal outcome
after such a strong run.

We may get a short-term bounce here but I am worried after this bounce. It seems
a lot of names were hit hard on volume and are now starting to wedge up on lighter
volume. The only outcome of this pattern is lower prices.

That all said, there still remain 7-8 out of 10 stocks in good technical shape…but
I must say the number is dwindling. As long as these numbers remain, there will
be plenty of breakouts. I would just go a little slower and use partial positions.
It may not be a bad idea to also tighten your stops.

I would continue to overweight the many TELCOM names that have popped out of
bases in recent weeks while taking some chips off the table of extended leaders
that have already had their run.

Gary Kaltbaum