Beware of Sister Semiconductors Bearing Gifts

October 7, 2019

Mish's Daily

By Mish Schneider

blankOctober has begun as choppy, volatile and news-driven month in its short history of one week.

Actually, I use the word “news” loosely. Think tweet-driven.

The leader of the Economic Modern Family and the overall market has been our sister Semiconductors.

After the big decline at the end of 2018, SMH was one of the first sectors to retake the key moving averages on the daily chart.

Since then, with the shallower decline in May and then again in August, SMH has hung tough in a bulish phase in all timeframes.

To date, SMH has traded as high as 123.56 in July.

With three weeks left in the notoriously scary month of October, is SMH offering us flowers, but with poison thorns?


I want to focus on Semiconductors today because of the sector’s strength.

Looking at the chart, the phase is decidedly bullish. That’s the roses part.

Now, look at the rallies since then.

Each peak price is lower than the one before.

One could also say that the bottommost lows are also higher since December.

And that would be true.

So, why do I choose the notion of our sister in a more demonic way?

On the longer-term charts, there is the potential for a triple top.

And it’s October.

And, SMH’s brethren remain way weaker (Transportation and the Russells are in bearish phases).

For actionable information, should SMH break under 118, that is a minor breakdown.

A move under 115 is a major breakdown. Not only does that break the higher lows pattern, it also breaks the 50-DMA and very likely the spine of our dear sister.

The only way the current bias changes, is if SMH makes a new all-time high. Anything is possible.

So before you stick your nose in the roses of the tech sector, watch out you do not get pricked.

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S&P 500 (SPY) Went back into an unconfirmed caution phase with 293.84 pivotal and 290 some support.

Russell 2000 (IWM) Rallied right to the 10-DMA resistance and failed. Now, 146 is the key support

Dow (DIA) Back to an unconfirmed caution phase. Makes 265 pivotal

Nasdaq (QQQ) 188.41 50-DMA did not hold so this too back to an unconfirmed caution phase. Support 185

KRE (Regional Banks) Bearish phase-until that changes sell rallies

SMH (Semiconductors) See commentary

IYT (Transportation) Death cross today so that’s not so healthy. 175 the big support level

IBB (Biotechnology) Could not hold 100-bearish phase

XRT (Retail) 41.00 50-DMA pivotal.

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