Wednesday, June 27, 2012

SOX Death Cross

For the third year in a row Philadelphia SE Semiconductor Index has a death cross on daily chart in the middle of the summer. Many of my followers know that I have been a big fan of this index. It is a cyclical indicator within the leading market sector - technology, and therefore it has an ability to predict sudden turns in the economy.

Without a doubt in my mind, SOX daily chart structure will have to reverse itself in order for the entire market to bottom and head higher. Bulls hope that SOX is going to do what it did in 2010, when death cross actually came near the bottom. Back then the price was able to get back above 50/200 dma and stay there.
But note that at the moment the bears are in control. The chart is now closely resembling 2011 scenario, when 50/200 dma cross was backtested and price rejection occurred. If this path is being followed, then the entire stock market is in for a major pain still to come.

Put this chart on your dashboard, and follow it religiously. It will save you from trouble.

click on chart to enlarge

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