As the Semis Teeter on Support, Let’s Check in on Sentiment
That 12,000 level in the Semis that was once resistance is now support. Will it hold? Will the semis make way for the others to rally?
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Should we start with the semis again? I mean, not much has changed, has it? The semis are down, and it leaves room for the rest of the market—or the Mag 7—to rally. And vice versa. But notice that despite all that selling and the not-so-pretty chart, the 12,000 level holds.
I want to reiterate why I start with this 12,000 level. It is essentially the June low (it is also where the SOX broke out in late May), thus it is support. I have noted for weeks now that the SOX has still not broken that early June low. Nor has it broken that mid-May low. In other words, there is still no lower low for this all-important group.
I try and ascertain if folks are still as bullish on the semis as they were a month ago, and I can’t tell. It seems as if the bears (who turned bearish in early May) have just gone silent after pounding their chests a week ago (the last time the SOX fell to 12,000), but it seems the bulls have gone silent as well!
The one thing I know is that the semis in the short term are getting oversold. I always prefer hysteria to accompany the oversold condition, but the market doesn’t much care what I want. I do believe a break of 12,000 would/could bring out some hysteria.
But let’s take a minute to discuss overall market sentiment. The Investors’ Intelligence Bulls are now at 55.5%. Readings over 60% tend to be what I would term giddy territory. We were last over 60% in early February when we got just over 62% bulls.
The Bears are down to 16.7%. They were a smidge under 15% in February. That put the bull/bear ratio at just over 4.0. Readings over 4.0 for the ratio tend to be bearish for stocks.
The current ratio is at 3.32 now.
Imagine if we see the SOX and maybe the Russell, which has been dogging it since it got overbought in late June, enjoy an oversold rally sometime over the next week (I prefer if it waits until next week), then you can imagine the Bulls pushing up toward 60%. Let’s call it a 2+ point move to 58%. That would not be difficult to do, would it? Not if the semis have a short-term rally.
And isn’t it possible the bears fall toward 15% on such a move? I realize I am just speculating, but long-time readers know I put a lot of weight in the Investors’ Intelligence survey, so if we did get something like 58% bulls and 15% bears, that bull/bear ratio would be at 3.9.
We’ll keep a watch on this, especially if those stocks that have been down so much since the calendar turned to the second quarter do get a chance to enjoy an oversold rally next week. Until then, the cross currents remain.
