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StockCharts Blogs - Don't Ignore This Chart! |
With help from component Merck, the Healthcare SPDR (XLV) bounced off support around 28. The ETF established support here with reaction lows in early September, early October and now early November. It is safe to say that the trend is clearly up as long as this support level holds.
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The Gold Miners ETF (GDX) is in for a big test as broken resistance turns into support. GDX broke resistance around 41-42 with a big surge in September. This level turned into support, and held, in early October. After a sharp decline the last two weeks, GDX is once again testing this important level.
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Once the SOX broke below the March and July lows of 2008, a new low close of 312 was established in mid-Sept 2008. After a move higher to quickly retest the earlier breakdown area, the SOX fell precipitously into late 2008. After months of trending higher, the SOX had climbed within a whisker of the 312 resistance area. On Friday morning, Intel (INTC) provided the catalyst to test this key area. The SOX opened at 311, just beneath support, then rallied to an intraday breakout at 316. At mid-day Friday, the breakout attempt had failed. The SOX had fallen back to 310. We'll need to see where the SOX finishes, but clearly a move above 312 on heavy volume would be bullish - the further above 312 the better. A failure at 312 is significant for a couple of reasons. First, heavy volume reversals generally put a halt to trends, especially in the short-term. Second, the long-term negative divergence on the MACD is evident. As prices have risen to new highs on the SOX, the MACD has barely budged higher. This is an indication of waning momentum on the part of the longs. Again, a close above 312 and we've got a totally different ballgame. Until then, however, you might consider lightening the load when it comes to semiconductors - at least until the breakout is confirmed.
The semiconductor group has been very influential during the recent rally. In fact, the SOX has been outperforming the S&P 500 since late in 2008. A key relative resistance area has been approached, however. Whether the market can sustain a move higher could hinge significantly on how semiconductors continue to perform on a relative basis.
-Tom Bowley
Join Tom and the Invested Central Team at www.investedcentral.com. Invested Central is an education-first stock trading service that provides its members with their flagship product - the Daily Market Report, intraday stock and ETF alerts, and LIVE chats 4 times a week, among other features.
Air Products (APD) is part of the chemicals group and the basic materials sectors. After surging to resistance in March, the stock consolidated around the 60 the last few weeks. The bulls came out in force as the stock surged to its highest level of the year with big volume on Wednesday. Could that consolidation be giving way to another leg higher?
The Retail HOLDRs (RTH) hit massive resistance around 78-80 for the third time since October. Resistance in this area stems from the October, January and April highs. In addition, the falling 200-day moving average is coming into play. After a run from 60 to 80, RTH is ripe for a correction that could retrace 50% of the prior advance. This would target a decline to around 70.
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