Time To Pull The Trigger On The Semis? Read On…
The
major indices traded and closed below last week’s outside week reversal bars
which was below 895.96 on the SPX and
8502 for the Dow. These and other indices and sectors which I said were red
flags staring you in the face were discussed in
Friday’s commentary. The quote from the text was “no edge for initial longs
up here until we see more of a pullback.” Yesterday I said that the SPX
(
$SPX.X |
Quote |
Chart |
News |
PowerRating) had pulled back 6.0% and the
(
SMH |
Quote |
Chart |
News |
PowerRating)s 18%, so any early upside
move starting this week should come as no surprise.
I have also said that if
the market is to make another move up that it had to go lower first from that
upper resistance zone and that the SPX should retrace at least .38 to the 769
low, which would be 883.36. The SPX closed yesterday at 892. The .618
retracement from 965 to 769 is 890, so that number is in play again. I’ve also
said that there is a stronger confluence at 860 – 865 and that if this market is
for real, then the 840 .618 retracement zone should hold. I still feel the same
way.
The SMHs declined 6.8%
yesterday, closing at 24.38, just above the intraday low of 24.30. The .50
retracement to the October low of 17.32 is 24.16. The .618 retracement is 22.54.
The semis led the rally up for the major sectors and you were told that a +2.0%
gain per day was unsustainable when the SMHs were up over 70% in half the days.
I also said that the shorts had mostly covered in the semis and that the only
thing that could hold them up anymore was the Generals’ real buying, or else
there was an air pocket below. It didn’t take much volume to knock them down 22%
in six days so far, but I see it as a positive in the making as the semi
overreactions are always extreme.
Also, those that missed
most of the up move have constantly asked, “Will the semis pull back to a decent
entry level?” Those same people are getting their answer right now, but you know
what? These same people that wanted the pullback to enter will not execute now
that it’s coming upon them.
Yesterday’s decline of
-2.2% for the SPX, -2.0% for the Dow
(
$INDU |
Quote |
Chart |
News |
PowerRating) and -3.9% for the Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) came on below-average volume as the Generals didn’t show up to
play. NYSE volume was 1.2 billion, which is about 15% below average for the
third straight day that it hasn’t been above 1.3 billion, the volume ratio was
just 14, and breadth very negative at -1432.
I am a bit disappointed
they are trying to goose the futures up pre-opening because as traders we will
get much better opportunities today on the early downside gaps, especially as
the indices approach some of the zones mentioned above.
Have a good trading day.
Five-minute chart of
Monday’s SPX with 8-, 20-,
60- and 260-period
EMAs
Five-minute chart of
Monday’s NYSE TICKS