TEXAS INSTRUMENTS WARNING PULLING SOX DOWN

SOX DOWN 3%... The Semiconductor (SOX) Index has fallen 3% in morning trading and is the weakest part of the stock market. It also explains the morning's relative weakness in the technology sector. The daily chart shows the SOX moving down to test its first line of support at the 20-day moving average. Any close beneath that line would be sign of more selling to come. Chart 2 causes a little more concern. That's because it shows the SOX slipping back below the high set in early December. Prices exceeded that high last week, but not by much. This week's slide back below that resistance level either negates last week's upside breakout -- or casts doubt on whether an upside breakout took place at all. In either case, it's cause for some short-term concern in this key sector.

Chart 1

Chart 2

TEXAS INSTRUMENTS WARNS... A profit warning from TXN is the biggest drag on the SOX today. The daily chart shows TXN gapping under its 50-day moving averge on heavier trading (and it's only the morning). The stock is also in danger of violating the previous lows formed during May. The daily MACD lines have turned negative; and the RSI line has fallen under 50. Both are signs of short-term weakness. Chart 4 shows that last Friday's downside reversal was a failed attempt to clear its early December peak. It now looks like the stock is headed for a retest of its five month up trendline near 17.5. That would also put it near its 200-day moving average. That could be an important test for the stock and for the SOX.

Chart 3

Chart 4