We told you Wednesday, after some suspicious action, that our leaders page did nothing more than get hit down to the 50 day/10 week moving average. This is a place where the boys come to defend or take a powder. Yesterday, a couple of hours in, they defended and this morning, a decent sized gap to the upside as a declining Asia and Europe rally nicely. Why? No clue. We just know that from our studies of hundreds of thousands of charts throughout the years, this area is where it is fish or cut bait. With it being December, markets decided to shrug things off and turn up. After all, the pull back here was again minor.
We always say we can tell by how things bounce/rally after a drop. We now know. Notice the DAX turning up, always important. As far as the SOX, still lots of work to do but notice recent breaks to the upside on TRANSPORTS, FINANCIALS and some RETAIL…look pretty darn good.
Just letting you know a bunch of growth leaders have recently been hammered on volume. But many were so extended, all they have done is fall down to their respective 50 day/10 week moving averages. It is this are that will be vital to hold. We will know more on any bounce, how they bounce, if the bounce is anemic and if they roll over breaking the 50 day. It is too early to tell. A few are green today off this line of support but tepidly so. There are a few just below this area and will need to see if they get back above. It is December, a month which usually has a positive tone.
Futures only down a wee bit but lots of jello moving on the plate.
Yesterday, NASDAQ up 60, finishes down. Need we say more…just more distribution. Again, does not have to mean the end of the world, Just recognize things have changed in that space. This includes semis/tech/internet and all that stuff. Seeing some pretty good looking tops…for now. Remember what we said. The SOX on 11/29 looks like June 9th. At that time, it took 3 months to get going again. But this time it is farther along. Time will tell…pay attention.
Also of note:
HANG SENG whacked over night giving back all gains from past months. The Japan Nikkei also looks toppy in here.
As far as the areas jammed to the upside recently like TRANSPORTS, RETAIL, FINANCIALS…watching how and where they pull back to as all broke out on volume.
More of the same this morning. DOW futures up 80…S&P only about 3 and NDX futures hardly up. NDX futures were down decently about an hour ago but have since bounced.
Reading many saying these divergences augur trouble to come. They could be right but we are not there yet. We would rather just stay in tune with what is and what isn’t. If what is joins in the downside, then we can talk. But so far, even with yesterday’s DOW reversal, FINANCIALS, TRANSPORTS, RETAIL, HOUSING-related still very strong off the tax bill…
BUT…them are some ugly patterns in big name growth/tech/semis and all that stuff. Keep in mind what we told you about the SEMIS. Look at June 9th for a possible precedent. Big ugly down day followed by 3 months of range-bound before breaking out again. Nov 29 down day looks about the same. We are not saying the same thing happens. We could have seen the final top. Just outlining possibilities. We always adhere with what is in front of us.