In terms of discerning the strength, or lack thereof, of the domestic equity market, a former colleague and old friend (RIP “Big guy”) used to place a great deal of emphasis on the price action of the semiconductor sector. His belief was along the lines that the price direction of the semiconductor group was a guidepost to the direction of the NASDAQ, which in turn was a guidepost for the DJIA. More succinctly, the absolute and relative price action of the semiconductor complex may be one way to measure Wall Street’s desire to own stocks (“risk on”) or sell stocks (“risk off”).   

I agree with my old friend’s opinion. This is one reason why I highlighted the semiconductor group during our early November Day Hagan Global Macroeconomic Webinar. At the time, the “semis” were overbought on a short-term basis, but their underlying relative strength trend was supportive of higher equity prices. Currently, the “semis” are still supportive, but due to a sharp pullback by the group, an important tactical support level has been established.

Dow Jones U.S. Semiconductor Index (Weekly) with 40 Week Moving Average. Tactical support exists at 3110 because the next range of support exists between 2900 and 2842. 7 percent to 9 percent below support. 

On behalf of the team at Day Hagan Asset Management, Merry Christmas and Happy Holidays! Please know that we are thankful for being part of your research and investment strategy needs. 

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written 12.18.2017. Chart sources: Stockcharts.com.

Print Copy of article: Day Hagan Tech Talk December 18, 2017 (PDF)

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