In our previous Research Excerpt, entitled Semiconductors: A Key To The Market’s Next Move, we published an excerpt and accompanying chart from our Monday April 30th Keys To This Week report (access requires subscription).
Here it is again:
Support/Resistance & Trend: PHLX Semiconductor (SOX) Index.
MAJOR DECISION POINT.
The orange highlights in Chart 5 below show that the market-leading SOX Index begins this week just above major overhead resistance at 1362, its 200-day moving average which was tested and held last week. In addition, the green highlights show that more important support exists just below it at 1211, which represents the December and February lows. How the SOX resolves this major support area is likely to indicate, if not lead, the US broad market’s next significant directional move.
We chose this particular chart for this week’s Research Excerpt because of semiconductors’ tendency to lead the US broad market both higher and lower.
The next chart is a newly updated version of that chart. It shows that the SOX has since rebounded by 71.00 points or 6%, and is once again challenging its 1362 top-of-the-tech-bubble high — actually for the fifth time since Thanksgiving.
During the same short period, the benchmark S&P 500 — which typically follows the SOX — has risen by 43.00 points or 2%.
We would view a sustained rise above SOX 1362 as evidence that the SOX is establishing a new, higher long term trading range, which we would expect to have a similarly positive influence over the US broad market.
We note that the current sideways, volatile, coiling market activity since late January indicates investor indecision — and typically becomes the springboard for the market’s next sustained trending phase, either up or down.
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