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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Return to Sender who wrote (56483)	6/3/2012 4:02:16 PM
From: Donald Wennerstrom	2 Recommendations Read Replies (2) \| Respond to of 95400

As always, I get a lot out of reading the IH weekly report. It covers a lot of ground and has a lot of statistical information to go along with it. One of the areas covered is the SOX, and this is what IH had to say: <<SOX. The semiconductors were crushed. Down over 4%, gapping below the recent lows and selling off. Already down below the 200 day EMA, so that is not in play. The next support levels in play are a long way down near 345. It has another 8-10 points to the downside. Semiconductors do not look good. They were leading lower and, true to form, they are leading the market to the downside as the rest of the market decides to follow these commodities to the downside that are in everything we buy now.>> Speaking of the downside, let's look at the weekly SOX action for the past year. As a point of information from where I am coming from, IMO the "guru financial press" started touting the "recovery" "big time" starting about last October. This effort IMO has continued without letup until the present. Here is a sample from Briefing.com's Page 1 of 30 March: <<Last Update: 30-Mar-12 08:51 ET The Rally is Fully Justified Stock futures indicate an up open of about 6 points for the S&P 500. That would put the index on track for a 12% gain for the first quarter of this year. There is a lot of head scratching and anxiety over the surprising rally of the past few months. Many analysts look to explain the improvement in equity values in terms of the Fed enhancing liquidity, or simply the reduction in "tail end risk" associated with a lower probability of a credit crisis in Europe. In fact, our January 3 Big Picture article titled "The Bullish Alternative" laid out the rationale for a 20% gain in the S&P 500 this year based on fundamentals. The S&P 500 index started 2011 at low valuations. S&P profits were up 14% in 2011, yet the index was flat. If profits rise 6% this year (general expectations) the S&P could rise 20% in 2012 just to keep up with the profit gains over 2011-2012 and still maintain low valuations. The gains in the S&P 500 this year simply reflect the index gaining ground consistent with profit gains last year. There was some serious catching up to do. The reduction of risk from Europe has allowed it to happen quickly. A correction is always possible after a strong run such as occurred recently, but market participants need not worry about a mini-bubble or irrational exuberance. The rally is justified based on the fundamentals. Today, there might be some end-of-quarter buying by portfolio managers getting fully on board with that theme. February personal income was up 0.2%, a tad below expectations of a 0.3% gain. Spending was up 0.8%, a solid gain that was a bit higher than expected. These data won't have much market impact. The key inflation index associated with these data, the core personal consumption expenditure deflator (PCE) was up just 0.1%. That is a Fed favorite for measuring inflation and doesn't reflect price pressures at a level of any concern. There are reports that European finance ministers will soon announce enhanced measures to address the sovereign credit crisis. That is providing support to the stock market today. The Chicago Purchasing Managers index is due at 9:45 ET and the finalized Michigan sentiment index is due at 9:55 ET. The market has shown tremendous intra-day resilience this past week even after significant down opens. The pattern of bouncing mid-day has been a boon to day traders, and reflects underlying support for equities. There has not been extended selling even on bad news. Upcoming earnings reports may present some headwinds for the market, and the upward momentum has stalled, but the market action has been surprisingly good. The fundamentals remains bullish. Dick Green Founder and Chairman, Briefing.com >> briefing.com Now let's look at the SOX chart. Starting in October, the SOX gained essentially 60 points in 4 weeks, or an average of 15 points a week. A really great "breakout". Then a pullback period occurred for the next 7 weeks until the middle of December. The next 15 weeks was a great upward trend to the end of March when the SOX peaked out at 438.64 starting at 352.86. That is a gain of about 86 points, or 24 percent. However, since that point, the SOX has been in a steep downtrend for the last 9 weeks. Five of those weeks have been big, long, dark red candles. Where we stop the downtrend no one knows, but IMO we have further to go. IMO we will need some quite good news to turn this around without at least hitting 340. I have no prediction as to whether or not we going into a recession, but I do find the situation extremely interesting. ECRI made the recession call on 30 September. At that point, almost to the day in early October, the "stock market press" started touting the great recovery. As shown above, on 30 Mar, a prediction was made for "easily" making a 20 percent gain in the S&P-500 for 2012. Where are we as of last Friday's close? - the gain for the year is 1.6 percent. The DOW is negative 0.8 percent for the year and the SOX is negative 3.1 percent. Personally, I find it very hard to wait to find out how this "battle" between ECRI and the pundits finally turns out. In the meantime we have to try to locate the coming "bottom" and catch the next uptrend early on.