Since the market is up handily in ‘pre’, I wanted to get you a look at what it would take to negate the technical damage of the last 2 days, with very simple daily charts of the headline US indexes (plus the SOX). This can be applied generally, to any index or stock for that matter. As of now in pre-market, these items are still well below key resistance levels.
Here is the SPX chart from last night’s public post, which showed SPX at the 1st Fib retrace level of 38%, but with the potential to eventually work down to the 62% Fib around 1925. I have added the red shaded area. Any close above yesterday’s high of 2031.45 would open the door to negating the damage. As long as it is below that level, SPX is considered below key resistance, keeping lower levels in play.
The Dow’s equivalent level is 17,355.21. Below that it is in breakdown status.
NDX is more complex, having been relatively weak for some time now. It’s equivalent breakdown level is at 4275, around Friday’s low. Another level of resistance is at the gap and moving averages clustered around 4400 to 4420.
Interestingly, and not surprisingly (given our recent analysis) fellow ‘tech’ index, the SOX has not broken down and it’s equivalent point to get out of the bear’s woods is 675, around the gap and the 50 day moving averages.
As you know, unless I have been fooled by the Semi Equipment bookings/billings trend, I am expecting good results from Semi equipment companies like Applied Materials and Lam Research. Q2 reporting begins next month. In the interim, the technicals are what they are and could provide opportunity. I just don’t know if it came from the support around 640 or will come from the 600 area. Both of these are above long-term support down around 550.
But unlike NDX for example, SOX is still in a series of higher highs and higher lows. So beyond looking to it as a trade, its value as a market leading indicator is still at the forefront.