Mismatched SOX

The chart of the Philadelphia Semiconductor Index has some very interesting attributes to it. The 50 day Simple Moving Average (SMA) is about to cross down through the 200 day SMA. This is known as a Death Cross, and you might be able to tell from the name, it is a bearish signal. But look at the other indicators. The Relative Strength Index (RSI) has been trending higher and making a new 2 month high. The Moving Average Convergence Divergence (MACD) indicator is positive and has been trending higher for a month. Both would support further upside. The Bollinger bands are also opening up as price reaches the top of the band. These signals all diverge from the Death Cross. The most important piece of information though, the price action, is at an inflection point. At previous resistance, it can either fail or breakout higher. A breakout will add new life to the semi’s and has resistance first about 4% higher. Failure of course confirms the Death Cross and likely drags the RSI back lower. Which will it be?

This is not the only confused macro chart and can help explain why there are so many disparate views on the direction of the market for even the next week. When Macro indicators are confused it makes no sense to go all in, especially with a macro bet. Playing the price action in stocks you are following and keeping tight stops should be (and have been for a while) your plan.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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