Don, it is not just the semi equips that are faltering anymore. What about ALTR? There are many other examples. In the case of AMAT how can selling on good news be a good sign?
I still plan on buying the dip though I am more concerned than ever that we are indeed in a topping process.
First let me tell you when we should be buying the dip.
Regardless of what chart format is being used look for another penetration of the lower Bollinger Band for the SOX/SMH.
When that happens do not buy.
Instead wait for the RSI of the index to approach previous lows. On my chart the last low was an RSI of 37.4:
stockcharts.com[h,a]daclyyay[pb20!b50!b200!c13!c20!c50!i!d20,2!f][vc60][iub14!la12,26,9!lg!li10,10!lh5,5!lp14,3,3!ll14]
When we get close to that level I still would not buy unless the VIX/VXO have both run high enough to give readings 10% above their 10 day sma's. I'm looking at a number of about 18 for the VIX/VXO. In addition look for the total put to call ratio to give a closing reading over 1.0. I have been complaining about the fact that this has not happened for weeks. It has not happend since the end of December. It's no accident that the SOX and NASDAQ cannot breakout in the absence of a high put to call ratio:
investorshub.com
Just like the majority of the people posting on this thread the market is showing too much bullishness. Too much bullishness despite weeks of consolidation at best. This really could be a top despite what honestly high expectations investors may have. In addition CEO's may have good intentions when stating they expect their sales to expand for as many as 10 quarters. I however find this more laughable than laudable. It's dangerous to buy into this talk at a time when companies are bringing numerous offerings to market to raise funds due to improved market conditions. It's true things are going to get better but with increased expectations come increased risks to investors should those expectations not be met.
Lets not get too complacent. It will cost us! Lets remember that bear markets are extremely painful and that they start when investors think the future is bright and getting brighter. We need more put buying to support the market. More short covering to cause it to rise again.
I fear that the handoff has already begun from institutions to retail investors. However, I admit that despite my concerns about the dow transports, the relative weakness of the NASDAQ and SOX, that the market could simply be undergoing healthy rotation.
That's why I will continue to buy the dip for now in hopes that what may look like a potential breakdown is simply handles on long term cup and handle chart formations for a lot of stocks and indices.
RtS |
