Since I think technology is the sector to rotate into ahead of back-to-school, let's take a look at SMH (semi-conductor holders) The chart is becoming somewhat bullish. We broke out above a three month descending trendline and have pretty much held on to the 20 day moving average since. Resistance is very clear at 50 dma (32.10). Confluence 10 dma and 20 dma at 30.75/30.85 is what needs to hold going forward, but there is wiggle room down to about 30.38, an area I would call the line in the sand for bulls. Should we break out above 32, the July 3rd high at 33.43 is next resistance, followed by the 200 dma at 35.75.
My bet is that the markets will initially drop after the Fed pause announcement (if they do pause, but at his point, there is nothing to indicates otherwise). This is due to the perception that the economy has become too weak and as we saw Friday, cooling economic news is no longer welcome. But I think investors are ready to drive this one higher once everyone calms down. SPX average p/e has dropped from the twenties to the mid teens and we now have room to pump up prices. Of course, there are quite a few folks that think Bernanke has gone too far and that we are headed for a recession. I don't buy that. Yet.
This entry was posted
on Sunday, August 06, 2006 at 8:19 PM.
