In Just a Week, the Bearish Chatter in the Semis Has Turned Overwhelmingly Bullish
You can see, feel, and hear the difference in sentiment. People are jumping back into the semis wholeheartedly.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
Can you feel the difference? I know you can. You can probably see it, feel it, and hear it. It’s what’s changed in exactly one week.
One week ago today, I noted how the anecdotal hate toward semis/tech was getting so loud. There was the former semiconductor analyst, turned strategist, who had liked semis in June. A week ago, he did not like them, but liked energy! And Monday? Now he is a fan of the semis again, even believing some can double from here.
No one is even talking about the head and shoulders top anymore.
The shift is not only in the semis but in tech in general.
A week ago, I drew in this (black) line on the chart of the QQQs. You might recall I had wanted to see a high volume down day in the QQQs, but instead we got that super high volume day in the SMH, an ETF to be long the semis.
The QQQs have now rallied 6%, and if you squint hard, you can see there is a little gap to be filled around 705. And depending how thick your pencil is, my blue downtrend line comes in just over that. As a pure chart, that’s where I would expect some resistance.
But as long-time readers know, my preference is always to follow the indicators, not levels. And while Nasdaq (and the S&P) have now been green for three straight days, Nasdaq is not yet overbought. The Overbought/Oversold Oscillator for Nasdaq is not even over the zero line yet. I expect it will cross it before the rally is over.
Since Nasdaq and the S&P have not strung together four straight up days in two months, I would not be the least bit surprised to see the market down on Tuesday. But it won’t change my view that I think, for the time being, folks will be buyers of tech on dips.
Just notice the way the SOX opened the day on the downside and steadily gained throughout the day. Oh, there wasn’t much progress made, but the dip buyers were there.
On the sentiment front, there is the anecdotal stuff I noted above. To that, I could also add no one seemed concerned about bonds on Monday, which is a stark change from late last week when the chatter was non-stop interest rates. I would note that the Daily Sentiment Indicator (DSI) for bonds got to 10 on Friday, so I am not surprised we saw a rally in bonds.
Sticking with sentiment, it wasn’t just anecdotal; the put/call ratio sank to .78, the lowest reading in more than six weeks. So folks have hopped back on board. Yet the five-day moving average of the ISEE Equity call/put ratio has just now turned upward. You can see I have circled the last five times it got this low and then turned upward.
If you’re bullish, you should prefer a down day Tuesday, as it would take some of the newfound bullishness out of the market.
