Friday, September 9, 2011

SOX NDX Divergence could be a Bottoming Signal

Hard to find any positives on down days like today. This said, I noticed that SOX was positively diverging from NDX all day.  It was even up for the first part of the day. As a matter of fact, it has outperformed the stock market this whole week. Those who read my blog know that I identified SOX as an early signal for market top.
We clearly have a development here that needs to be watched. If SOX can continue trending higher, then I am going to keep my eyes on NDX for a possible rally and a whole market rally in sympathy to these leaders.

Technicals: SOX has to hold above trendline from 8/19 low on closing basis to keep me bullish. There is a gap to fill @ 339. It has to get above 363 on closing basis to continue the rally into 380 - 390 area, where it will meet a formidable resistance. That is 9 - 12% from here. We can see a nice 10% NDX and a whole stock market rally from current levels out of this development.

Stay tuned...

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