There seems to be a lot of discussion on Twitter and related sites like StockTwits about the lack of confirmation in market breadth after the recent rise in equities. Some are even noting bearish charts for the Nasdaq going back to the dot-com bubble peak. Other great traders and bloggers are discussing the breadth issue, most notably my good friend Ryan Detrick.
But there is another piece of data that’s also lacking a confirmation signal, and it’s one that I’ve referenced a couple of times in the past – the semiconductors.
While the S&P 500 (SPX) closed in on its prior closing high, we did not see the same level of bullishness in semiconductor stocks, as represented in the Semiconductors Index (SOX). Back in December I wrote an article titled, “Dr. Copper Has Been Replaced”. In that article, I made the argument that Copper has been replaced by Semiconductor stocks as a better barometer of market risk taking. While I don’t expect Semiconductors to move in lock-step with the broad equity market, the current lack of confirmation is quite discouraging.
The news of the day has largely focused on Apple’s earnings and the large gap down for the stock. While many great traders were pointing to the lack of breadth confirmation earlier in the week, others were pointing to the strength in tech names like Apple (AAPL) and Google (GOOG) as a sign that the skies are clearing. As Apple experiences a kick-in-the-teeth, I wonder if this increase in weakness among semiconductor stocks was a bit of foreshadowing for the tech giant…
Semiconductors Index (SOX) vs S&P 500 Chart
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