Sector Investing

[ReturntoSender]

Semiconductor Stocks Lead Market Lower
By Harry Boxer, The Technical Trader

http://www.thetechtrader.com/closing/index.php?HTTP_REFERER=(none)

The indices were weak today, although the Dow and S&P 500 only had fractional losses. Nasdaq was much worse. That was led down by the SOX Index, which dropped about 3 ½ percent today. The semiconductor stocks, in general were weak, and the differences in the price patterns between Nasdaq and S&P were distinct.

Both indices opened lower on the gap down and had very sharp morning sell-offs, initially taking out key short-term support but holding at secondary support before bouncing in the morning. The morning rally peaked before lunch hour and even though they moved a little higher on the S&P during the rest of the day, and the S&P went to new intraday rally highs, the Nasdaq 100 was unable to duplicate that, with the semiconductor stocks and SOX index constantly pressuring it all day.

There was a late afternoon retest of the lows on the Nasdaq 100, and a retest of mid-day support on the S&P 500 that created a last-hour bounce. But net on the day it was still a negative day. The Dow was down only 2, the S&P 500 down 1 1/2, but the Nasdaq 100 was down 16, the Composite down 14 ½, and the SOX Index down nearly 16, or, as I mentioned before, nearly 3 ½ percent.

Advance-declines were exact opposites on New York and Nasdaq, with 18 to 13 positive on New York and about 18 to 12 negative on Nasdaq. Up/down volume was positive by 7 to 5 on New York with about 1 ¼ billion traded. Nasdaq was about 2 ½ to 1 negative, with over a billion to the downside and less than 400 million to the upside, on a total of about 1.4 billion traded there.

Reviewing the TheTechTrader.com trading board today, losses were led by Broadcom down 1.34, the SMH down 1.10, and IPIX, which on a negative comment on CNBC late in the day got hammered for a couple points. It closed down 1.21 on 28 million shares, not far off the lows for the session. That also put a drag on some of the other stocks in that group, MAGS down 60 cents and MACE 50 cents.

OVTI was down 88 cents to another new 2004 low and following through on its recent losses. Qlogic was down 50 cents as well. So the semiconductor group really had a bad day.

Among other losers, Asyst (ASYT) a low-priced semiconductor stock, was down 41 cents and Aetrium (ATRM) fell 49 cents.

Among the few bright spots, Alvarion (ALVR) continued its run of the last three days and has now moved up about 3, today up 58 cents, acting very well relatively. Low-priced Proxim (PROX) was up 31 cents on 22 million shares on an announcement of a deal with Intel.

Stepping back and reviewing the overall patterns, today’s lows were right on the six-week rising trendline that we’ve had since the rally began back at the beginning of May, and as a result we’re at a key point in the overall pattern. The NDX resembles a potential head-and-shoulders top pattern. The S&P look s a little better, but I’m very concerned about the patterns I’m seeing. The market is undergoing some key tests which will determine the trend, I believe, for the next 2-3 weeks depending on whether it’s successful or not.

But I will say the overall pattern on Nasdaq is a lot weaker. It appears that it’s formed a bear flag right at the major rising trendline, and a break from here as well as a break down below today’s low on the S&P 500 would be a very negative signal for the short-term trend of the market.

Good Trading!

Harry