Wednesday, December 18, 2013

Daily Market Commentary: Semiconductors Going It Alone

In an unusual divergence, the semiconductor index went it alone and is on the verge of a new closing high. This despite losses elsewhere, including small losses in the Nasdaq and Nasdaq 100.

The uptick in the semiconductor index should offer help to the Tech indices. There was a relative shift in favour of the semiconductor index against the Nasdaq 100, but a similar move in September eventually petered out. I'm not sure there is enough momentum in the overall market to see this one through, but until proven otherwise, this bull run in semiconductors is to be respected.


I have the Nasdaq 100 in a narrower bullish channel, with the old bullish channel resistance marked by the dashed line. The index is still holding its 20-day MA, although technicals are weakening. Distribution has dominated over December, but declines haven't been sufficient to threaten the bull trend yet.


The S&P struggled to hold on to yesterday's gains. It hasn't lost support, but the technical picture suggests it will.


The Russell 2000 didn't break above resistance, only registering a modest loss. Shorts have the best opportunity, although today's late day rally suggests it may take a pop higher tomorrow (it won't take much to register a breakout).


Bulls should take their lead from the semiconductor index: if it's unable to advance to new highs in early trading then bears will control of the day.The Russell 2000 could go either way. The S&P is looking the most bearish of the indices after returning yesterday's gain.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com.
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