Monday, September 12, 2011

Semi Bullish

The semiconductor index was in positive territory the entire trading day, and closed up over 3%. The horizontal line in the chart is a bullish breakout level.

This chart is the ratio of the semiconductor index to consumer staples, a contrast of a hyper-sensitive, cyclical industry, with a defensive sector. A break above the trendline, and a first higher-low, higher-high in a long time may occur soon.

Above are the relative strength lines of consumer discretionary, technology, and transports, respectively, against the S&P 500. According to John Murphy's work on sector rotation, in that order, those sectors show relative strength as the economy moves from a late contraction to early expansion phase. The charts are following that script, suggesting we will see an uptick in the economy.

I am inclined to conclude that the next significant development is for the S&P 500 to reach its 200 day moving average, currently at 1283. Treasuries and Gold should correct.


  1. Wow. What a wonderful post. Amazing.

  2. With that sort of compliment, I'll hold my breath that this projection pans out.

  3. Well, I am confident that SOX is going to 390, with a brief stop at 375 first. I am long until 375 (with TNA), and will buy a dip after that. I would have tried to go long even without these charts, but your analysis helped. I used to look at SOX every day, but hadn't for a while, and you brought my attention back to it.

    This is indeed very good work - clear, insightful, and pithy.

  4. BTW, I think the RUT is going to 750.