PROFIT-TAKING HITS ENERGY SECTOR -- OVERSOLD SOX IS BOOSTING QQQs AT 200-DAY AVERAGE
ENERGY ETF BREAKS 50-DAY LINE... The Energy sector was been one of the few sectors to withstand the market's downside correction. At least until now. In today's trading, Energy is the day's weakest sector. Part of that may be attributed to the fact that energy prices are also experiencing some selling today. It may also have something to do with a sharp bounce in the U.S. dollar on renewed belief that the European central bank may be getting ready to lower interest rates. That would strengthen the dollar and weaken the Euro. The fact that energy leadership (and rising energy prices) has been one of the negative factors weighing on the market, today's energy selling appears to be encouraging some bottom-picking in the market's most oversold sector -- namely technology and semiconductors in particular.
Chart 1
SOX BOUNCING FROM OVERSOLD CONDITION... When money starts to move out of one of the market's strongest groups like energy, it often rotates into one of the weakest. That would be the semiconductors. That may explain today's 2% bounce in the Semiconductor (SOX) Index. It's also worth noting that the SOX is in the process of testing long-term support at its 200-day moving average. This would be a logical spot for some bottom-fishing to re-appear in this key technology group. The daily oscillators (mainly stochastics) also show the SOX to be in oversold territory. That's helping to support the Nasdaq market, which is also testing major support.
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NASDAQ 100 QQQS BOUNCE OFF 200 DAY LINE... The last time I showed the Nasdaq 100 QQQs I talked about a test of major support near 34, which was the December low and the 200-day moving average. I suggested that would be a crucial test for the Nasdaq market -- and the market as a whole. In today's trading, the Nasdaq 100 is the day's strongest index and is helping to steady the entire market. The Nasdaq Composite is also finding some buying near the 1900 level. It's getting a lot of help from the SOX Index and some big-cap tech stocks like Cisco, Intel, and Microsoft which are trading higher today. While it's too soon to draw any major conclusions, it does seem that the market is getting help on two fronts -- falling energy stocks and rising semiconductors.
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