SOXX: Testing The Top

12:03 p.m., EST

Underside Test of Resistance

The last update on SOXX, noted one thing missing was a new daily low confirming the reversal. About 15-minutes after that post, SOXX printed a new daily low.

Now, we’re in an underside test of the breakdown.

The daily close chart (above) shows price action coming back to the underside. This is how the market squeezes out risk of a short position (not advice, not a recommendation).

Yesterday’s update had a link to ZeroHedge about how the market ‘has to’ move higher this week; the ‘selling’ is finished.

A healthy way to view this type of information is to be aware of the source.

If it’s a major retail brokerage or trading firm, their own (internal) market stance is likely to be completely opposite their financial press release.

Let’s see what happens next.

We’re not looking to short the SOXX but it’s still an educational exercise to monitor the sector.

Stay Tuned

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Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

SOXX: Textbook Top?

11:48 a.m., EST

By The Book?

SOXX chart: Like something from a book on trading

Price action’s struggling at new highs. MACD’s posting a bearish divergence. Can it get any better for the shorts?

(not advice, not a recommendation)

At least one thing missing (as of this post) is a new daily low. If we get that, it helps provide confirmation of a SOXX, top.

The S&P (SPY ) and the Dow (DIA), have both posted new daily lows as has the Russell 2000 (IWM).

We can also throw in Basic Materials DJUSBM (IYM), making a new daily low.

Recall in a previous update, empirical observation over the years; market tops tend to occur before, during, or just after a holiday week.

Looks like we may be there.

Stay Tuned

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Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

SOXX: Signs of a Top

10:56 a.m., EST

Semiconductor SOXX, at Danger Point

‘Spring-to-Up thrust’ is a common price action phenomenon.

Credit goes to the late David Weis for noting this behavior in one of his daily market updates from years past.

Now, we see it in action with SOXX.

As with airlines, semiconductors are highly susceptible to economic changes. Both operate on thin margins and have high capital costs.

Airlines (at least UAL and AA) have never recovered to new all-time highs. Maybe the semis went higher because of all the contract tracing that’s being projected.

However, noted in yesterday’s update, there’s a chance there won’t be much to ‘trace’; we’ll find out very soon.

SOXX is at the danger point; risk of a short position (not advice not a recommendation) is at minimum.

As an extra reminder, we’ll add a frequently discussed theme for market tops: ‘Holiday Turns

Emperical data shows that markets tend to reverse before, during, or just after a holiday week.

This week could be one of those.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Off With Their Heads

Head & Shoulders patterns are showing up in several markets.

First, there’s biotech IBB … and now the SOXX.

The SOXX is higher in pre-market around +2.5% , +2.70%, near 385.25.

Conversely, inverse SOXS is down -9% to -10% near the 14.00 -area.

Today could be the day where risk is minimized to position short via inverse SOXS (not advice, not a recommendation).

If SOXX remains below yesterday’s high of 397.71, it has set itself up to break the neckline. Once that’s completed, we’d then have a measured move lower to around 320.

If short via SOXS, the stop would theoretically be yesterday’s low of 13.21.

We all know however, inverse funds and especially the 3X versions, have significant negative erosion.

If during the regular session, SOXX price action persists throughout the day near yesterday’s high (397.71), inverse SOXS will continue to erode below its own prior daily low.

A different view is the Right Shoulder has not been completed. We’ll know that if SOXX makes a new daily high.

It’s a myriad of scenarios and the professional understands there’re an infinite number of outcomes. However, at times, risk is reduced enough to take a position on a probable direction.

At this juncture and given the above conditions, the most probable direction is down.

One last caveat.

SOXX has broken below well established support. That puts it in Wyckoff spring position. The market will automatically attempt to rally as we see in the pre-market.

Based on the conditions described, we’re expecting that spring attempt (to new all time highs) to fail.

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Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

Hanging by a Thread

Semiconductor SOXX, is hanging by a thread.

Did SOXX just break away during the past week or is there going to be an attempt to close the gap?

When a market closes down for the week and near its lows, there’s usually follow-through action at the next open.

SOXX may never get the chance to fill the gap.

If we look at inverse fund SOXS, it’s showing a potential trend-line. Maintaining that line will double the price (at Friday’s close) sometime in early March.

The chart below also shows the firm’s entry point; not advice, not a recommendation.

In a way, semiconductors are similar to aviation; margins are razor thin.

When there’s an economic down-turn, both get hit especially hard.

At this juncture, I have positioned my firm short in both real estate (via DRV) as well as short the semi-industry (via SOXS). Not advice, not a recommendation.

The SOXS position finished in the green by the close. DRV is showing a loss but closing that gap quickly.

Separately, and in a report planned for tomorrow, we’ll cover the food supply. The ongoing (planned) shortage is proving correct, the approach it’s ‘corn first, then silver and gold’.

If Van Metre’s GDX forecast is on target (declining to 17, or even 14), gold bugs may find themselves liquidating their positions; just so they have enough money to pay for hyper-inflated food.

In effect, gold will be irrelevant; a very possible (short-term) event.

Stay Tuned

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Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.