Semiconductors Firm Up A Swing Low; Volatility Could Return

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There wasn’t a whole lot to Friday’s action but two indices which were struggling a little did benefit.

The Semiconductor Index gained 1% as it bounced strongly off the bullish ‘morning star’. The consolidation triangle looks to be shifting to another pattern but resistance from triangle swing highs remains in effect and is the next challenge of the index. Technicals are net bearish and relative performance, while recovering, hasn’t yet undone the most recent ‘sell’ trigger.

Semiconductors Firm Up A Swing Low; Volatility Could Return

SOX Daily Chart

The Russell 2000 had a more low key day with a modest gain, enough to diffuse the series of weak doji days although the index is underperforming against the NASDAQ and technicals are mixed with bearish signals for the MACD and ADX.

Semiconductors Firm Up A Swing Low; Volatility Could Return

RUT Daily Chart

Other indices didn’t have a whole lot to report for Friday. The S&P finished with a narrow range doji as relative performance remained positive despite a small loss.

Semiconductors Firm Up A Swing Low; Volatility Could Return

SPX Daily Chart

The NASDAQ also closed wih a doji on mixed technicals but as the index is a few days from challenging prior highs it’s underperforming against the S&P. Let’s see what Monday brings.

Semiconductors Firm Up A Swing Low; Volatility Could Return

COMPQ Daily Chart

I haven’t mentioned it in a long (long) time but volatility may be about to break out of its decade long underpeformance. How will markets react to this long needed period of chaos remains to be seen, but Trump will probably be a catalyst for this at some level.

Semiconductors Firm Up A Swing Low; Volatility Could Return

VXN Monthly Chart

I’m not seeing much on the longer term charts—nothing to suggest bears are gaining control. The only one weakening at a rate which suggests the end will come within the next 12 month is the 2-year bond yield curve; an inverted yield curve has preceded the last two major sell offs. However, this is a slow burn chart and not something we can expect to see a change in the next couple of weeks or months.

Semiconductors Firm Up A Swing Low; Volatility Could Return

YC2YR Monthly Chart

For today, keep track of the recovery in Semiconductors and Russell 2000. If the former can continue to advance to triangle resistance it will help push the NASDAQ and NASDAQ 100 to new all-time highs.

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