Why The Semis Should Be In Play This Week
What Friday’s Action
Tells You
After all was said and done last week, the Dow
Jones Index proxy, which is the DIA, closed at 91.39, just below 91.60, where it
had opened the week on a gap up from the July 3, 90.70 close. The three days
prior to the July 4 holiday were up, followed by the first day back. The DIA high of
last week was on Monday at 92.77 with the low on Thursday at 90.12, which was
just below the.50 retracement to the July 1 low of 88.85 from the 92.77
Monday high. The morning rally on Friday had the Diamonds retrace up to 91.66 vs.
the .618 retracement to 92.77, which is 91.75.
Close to close, the Diamonds were +.7% on the
week, but from a trader’s point of view it was a down week. From 10AM on Monday
at 92.77 into the 91.39 close on Friday which was only after a last-hour markup
from 3 PM into the close starting from a 90.91 low.
For Active Traders
There was lots of noise last week regarding earnings and economic this or that,
so erratic trading does not surprise. I expect more of that this week as 7 of 8
Dow Jones stocks report earnings for the 2nd quarter. There are also 3 or 4
economic reports, which are also good for some futures manipulation assisted by
media hype which has reached the point of being ridiculous on month-old data
that is constantly being revised.
On top of that you have Greenspan’s dog and pony
show this Tuesday and Wednesday as he puts Congress to sleep with his ever
increasing doubletalk on the economic outlook and monetary policy. Good luck
trying to understand his doublespeak. Net net, anything perceived as good this
week will be extra hyped by the media.
The major indices all finished up about 1% on
Friday, due primarily to the last hour markup into the close. Once again,
overall NYSE volume was on the lighter side, at 1.2 billion, volume ratio 70 and
breadth also very positive at +1205. On paper, it looked like a good day on
Friday but the rising prices and declining volume is not what tells us the major
indices are blasting off again.
Today’s Plan
The first two days of this week has almost all of
the major banks reporting, and in the semiconductors, Intel and Teradyne are on
Tuesday, followed by AMD and QLGC on Wednesday and MCHP on Thursday That
means the SMHs will be a key focus and trading vehicle this week. They closed
Friday at 31.18 and have been trading in a 2-day box between 31.30 to 30.75.
Watch for early volume clues in the stocks and the SMHs.
We start out today with the SPX having held the
20-day EMA for the past 2 days and closing Friday at 998.14, just above the 1.0
volatility band, which gets my attention, but I think news will dominate
technicals this week. When that happens most of your better trades will be
reversals of over-reaction.
I am doing this Sunday night for Monday, do I
don’t get to see the pre-market futures games. Either way, this could be a good
trading week in both directions especially if the hype is positive, in which
case they will try and run them up again.
Have a good trading day.
Kevin Haggerty
