Tuesday, July 26, 2011

SOX still diverging

Let's revisit the SOX technicals and fundamentals.
It is still diverging from NDX. Price is backtesting 50 dsma as I type. Downtrend line from 5/12 is just above here. This pattern reminds 7/7 backtest which failed miserably. Let's see what transpires.

BRCM and TXN reported last night. Mixed signals are coming out of semiconductor sector. Some companies are going strong, while others are slashing the outlook. I am not an analyst to digest in deep detail, but seems like those chip co's who positioned themselves with APPL and other strong mobile suppliers are going to be just fine; while others who have missed the mobile boat are struggling to find their new growth source.

Let the SOX chart speak for itself. Plot it over the NDX chart and see the result for yourself. We were early here to identify the problem...

UPDATE July 27 1:05 pm edt
Failure @ 50 dsma it was again. NDX is taking cue from SOX - the most cyclical component. To add to worries of traders are some of the ugly earnings from likes of JNPR. The latest discussion revolves around a thought on who in the world will spend for tech upgrade once US Gov't is in austerity mode? IBM better watch out!!

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