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The reversal in US markets is coming after a period of under performance by large tech stocks and the momentum darlings like YELP, FB, TSLA, and of course, my personal whipping boys, the 3D Printers.
Until today the Semiconductor sector (SOX, top panel of chart) was relatively strong amid this price erosion. Not today. While SOX is not broken, we have significant warnings going on with other former bull leaders like the Nasdaq 100 and Russell 2000 showing renewed technical damage after briefly getting back above the MA 50’s.
If they do not quickly retake the MA 50’s, thereby painting today as a whipsaw/shakeout, we will be in increased caution mode with the US market. With the look of today’s activity, I am personally going into caution mode as it is. Ref: the Equity Put/Call ratio shown in NFTRH 284.
The S&P 500 in the lower panel would have us believe things are routine. But with all the comparisons of the projected 2014 top to the 2000 top we have been making, we might remember back then how tech broke first and most spectacularly prior to the onset of the first cyclical bear market out of the 20 year secular bull.
Now, this is not a call for a bear market. Please understand that. But at the least we are now on guard for a correction that could dig deeper than just the former momentum leaders if the SOX continues to weaken and NDX and RUT burrow further below their 50 day averages.
This is how it looks at the moment. We’ll take a good look at it on Sunday in NFTRH 285, after this week’s dust settles.