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Strategies & Market Trends : Technical analysis for shorts & longs

SPY 685.33

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Jan 21 4:00 PM EST

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To: Johnny Canuck who wrote (37379)	6/21/2002 2:52:34 AM
From: Johnny Canuck	Read Replies (1) of 69928

Sector Siesta – Spotlight on Semiconductors By Andy Stout 6/20/2002 1:29 PM ET The day started off great for the PHLX Semiconductor Index (SOX: sentiment, chart, options) by gaining nearly two percent in the first five minutes of trading. Ten minutes later, it all fell apart as the SOX lost 20 points over the next hour falling down to 398. Over the last few weeks, the SOX has been in a free fall, losing 140 points over the last month. If the index is not able to stay above the 400 level, it could easily fall to its September lows around 344. One thing not working in the SOX's favor is the amount of optimism that remains in the sector. The short interest level is the lowest it has been in over a year. The Schaeffer's put/call open interest ratio has shown that investors have not exhibiting fear toward chips. The graph below shows investor complacency, as the ratio has remained stagnant over the last few weeks. In order for a bottom to form, we need to see that ratio spike higher. Low put/call open interest ratios usually indicate that the buying power has depleted. If the buying power is gone, the sector will have a very difficult time gaining any real ground. The sector will not move forward until that open interest put/call ratio has risen higher, which means that selling strength has faded and there is excess sideline money to help bolster a rally. It would also be nice to see the short interest bolt ahead. Large amounts of short interest often lead to good rallies. This is because as the sector begins to rise, investors get nervous and are forced to cover their shorts, pushing the index even higher. Until we see some negative sentiment towards the SOX, we will not see the true bottom.

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