CHARTING STOCKS: Semis Make Your SOX Go Up And Down
05 Mar 16:22
By Stephen Cox, CMT A Dow Jones Newswires Column
NEW YORK (Dow Jones)--The behavioral school of technical analysis says that
the first leg of a new, long-term bull market isn't the longest leg. That's
because most traders sell aggressively into the new uptrend, reasoning that
it's only a correction of the long-term bear market they've grown used to.
Those traders typically realize their folly after the market recovers from
the dip caused by their selling and then races to new highs. So says thetheory.
Sticking with the theory, one could argue that participants who associate the
previous year-and-a-half bear market with weak semiconductor stocks may be
ignoring a compelling, if tentative, technical breakout of the semiconductor
sector Tuesday.
The widely followed Philadelphia Stock Exchange SOX index of 17 semiconductor
stocks (10 NASDAQ, seven NYSE) recorded a new high for its uptrend since Sept.
27. Its intraday move to 616.72 broke consolidation resistance at 606.88, and,
if the breakout is confirmed on a daily closing basis, SOX is pointed up to
minimum target resistance at 700.56. That could happen by mid-month, at the
earliest. Semiconductors' performance isn't uniform.
KLA-Tencor Corp. (KLAC), the richest of the SOX components, closed at around
$67, and its Tuesday intraday high, $67.57, is the highest reading for its bull
move from the Oct. 5 low of $28.61. Meanwhile, Motorola, Inc. (MOT), the
cheapest component of SOX, has in fact been falling since it recorded the Aug.
2 high of $19.45. It bottomed on Feb. 22 at $10.50. Its Tuesday intraday high
of $14.87 is well below the August peak.
Nonetheless, SOX's tentative breakout is remarkable technically. That's
easily seen by comparison with the Nasdaq Composite index.
Both Nasdaq and SOX found bear market bottoms in the last week of September.
Both peaked on Jan. 9 and fell into corrective downtrends. However, Nasdaq fell
steadily for about six weeks, but SOX fell for only a week and then marked time
until Nasdaq found a bottom. SOX took out its Jan. 9 high on Tuesday. Nasdaq is
roughly 250 points below its Jan. 9 high of 2098.88.
Both indexes are evidently bullish, but SOX is clearly leading the Nasdaq on
the charts.
Perhaps those behavioristically inclined technicians are pounding the Nasdaq
on the one hand, while with the other they're grabbing semiconductor stocks
just in case this really is the second leg of a long-term bull market. They
know the behaviorist theory, after all.
And that's the drawback to behaviorism: the behaviorists are always
second-guessing themselves. Show them a new market leg and they forget how to
behave.
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For more technical analysis see: Dow Jones Newswires, N/DJTA; Telerate, page
4247; Bloomberg, NI DJTA; and Reuters key word search "Charting Markets".
-By Stephen Cox; 201-938-2064; stephen.cox@dowjones.com
(Stephen Cox, a chartered market technician, is chief technician for Dow
Jones Newswires.) Data by CSI, Commodity Research Bureau
(END) DOW JONES NEWS 03-05-02 04:22 PM |
