More on the $SOX.... Reid was kind enough to upload the chart linked below:
Long-term trend is up, following a V bottom in late 2002.
Within that trend is a long-term downtrend that began in January 2004.
Within that trend is a shorter-term uptrend that began in September 2004. This will get tested soon, as the $SOX trades down to the lower regression channel rail (red line).
themarketwind.com
There, it will fail. Next target will be long-term chart support at just above 350. That will probably fail temporarily, and the $SOX will briefly test the very long term lower regression channel rail (blue line in above chart). Probably by the time this happens, the blue line and the lower chart support will be very close, because the regression channel is rising, but obviously chart support is static.
So I consider the blue arrow in the above chart to be the most likely reversal point, which would be chart support, but also lower regression channel rail support.
Note that the $SOX is not absolutely required for the Nasdaq to advance. You can see this from the chart below, which is the ratio of the $SOX to QQQQ.
stockcharts.com[w,a]waclyyay[df][p][vc60]&pref=G
But you can also see from this chart that when the $SOX is not participating in the general market rally, the index cannot advance nearly as strongly. So... in this chart, QQQQ's rally after the $SOX headed south was much more subdued, and eventually stopped in its tracks, and a correction started that we are currently in the midst of.
Based on these things, I think it likely that QQQQ will emerge from the medium term downtrend at a time when the $SOX is still correcting. QQQQ will proceed upwards, but not sharply. It will work its way along with some effort for a few months, but when the $SOX reverses, then QQQQ will trend strongly upwards.
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