NDX is in a sloppy looking pattern, is dropping into a support zone and needs to hold the moving averages to avoid going from sloppy to bearish. Captains like Alphabet, Facebook and Apple are shaky to bearish and obviously valuations are starting to matter. NDX is down another 1+% in pre-market.
SOX tends to lead NDX, and it has a potentially more pleasant setup, depending on whether that is a ‘W’ bottom. If that is the case it is curling down from resistance at the middle of the ‘W’ and will find support at the moving averages. If not, it is a doubled humped H&S and will ultimately fail. We are back in ‘watch the Semis’ mode in a microcosm of the late 2012/early 2013 phase.
Here is the ratio between them. SOX led everybody out of the morass into the best part of the bull market beginning in Q4 2012. It then abdicated leadership just before the worst of last summer’s corrective activity and broke the leadership channel. Now it has bounced to said channel bottom. As I said, let’s watch the Semis closely.
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