|
Follow Your SOX
In our October 28th Asbury
Alert (access requires subscription) we warned our subscribers
of some potentially bearish price activity in the PHLX Semiconductor
Index (SOX) .
We are particularly
interested in the SOX because it tends to lead the tech-laden NASDAQ 100
(NDX), and the NDX tends to lead the US broad market. Matt Phillips, a
reporter for The Wall Street Journal, picked up on our analysis
and published our observations in The WSJ's MarketBeat blog. You
can view Matt's article by clicking here .
An excerpt from our October
28th Asbury Alert appears below.
Asbury Alert: The US
Stock Market
Emerging Breakdown In The SOX Index May Lead US Broad
Market Lower
Wednesday, October 28th 2009
As of midday today the
PHLX Semiconductor Index or SOX has already broken down through
305 support, while the Dow Transports are flirting with a breakdown of
their own through key underlying support at 3,655. In today's Asbury
Alert we take an updated look at the SOX Index, explain why a breakdown
through 305 support would be significant, and then provide some initial
downside targets should this emerging breakdown be confirmed on the
close today.
Chart 1 displays a
daily chart of the SOX during the past year. The reason we are
particularly interested in the SOX is because it typically leads the
Technology Sector (thus its 88% positive correlation to the NASDAQ 100
since 2006), and the Tech Sector typically leads the broad market.
Accordingly, we look for emerging changes in direction in the SOX as
a potential leading indication of a directional change in the US broad
market.
A very good recent example
of this relationship took place back in February, when the S&P 500 (SPX)
had just broken through its November 2008 lows at 801 -- which had
investors frightened to death. The SOX, however, had not
coincidentally broken its November lows and instead tested, held and
rose from major support at 183, which represents its October 1998
benchmark low. This positive divergence by the SOX actually led
the March 6th bottom in the SPX and both indexes rose from
there.
We actually talked about the
significance of that support level in the SOX and its potential effect
on the broad US market during a February 25th appearance on CNBC's Fast Money
(click the link to view that interview).
Now we may have the
inverse situation to what took place in February-March emerging on
the charts.
continued...
Asbury Research
subscribers can view our October 28th Asbury Alert in its
entirety by visiting the Asbury Research website and entering
their Username and Password.
Professional
Investors can request a complimentary copy of the rest of this
report, plus a 2-week trial of our research by CLICKING
HERE and typing "SOX Index" after their first name, or by
calling 224-569-4112.
You can view more samples
of our research by visiting our blog, Logic-Over-Emotion
Investing .
Asbury Research
provides a unique blend of technical, behavioral and quantitative
analysis from a 29-year veteran of the US financial markets. Our
research is directed to a small group of sophisticated investors that
understand the value of limited distribution, independent thinking and
personalized attention. Asbury Research offers the Asbury Indicator
Matrix™(AIM) which integrates price movement, investor sentiment,
seasonal analysis, relative performance and intermarket
relationships to produce a forward-looking, multi-dimensional
assessment of WHERE the major US financial markets are headed,
WHAT market factors are most likely to affect their current price
trends, WHEN these trends are likely to change, and WHY,
and HOW to determine when they do. Our clients include the Chief
Investment Officers, Portfolio Managers and Head Traders for some of the
most prominent portfolio and hedge fund managers in the world.
|
Back to Top Advisors Corner Menu
