CHIPS LEAD MARKET INTO FRIDAY RALLY -- INTEL AND NOVELLUS ARE CHIP LEADERS -- TEXAS INSTRUMENTS BREAKS OUT -- NASDAQ 100 IS STABILIZING IN MAJOR SUPPORT ZONE
SEMIS GAIN OVER 3%... Last Friday I wrote about new signs of strength in the semiconductor group. I also wrote that buying in that group -- if it continued -- would be supportive to the technology sector and the market in general. That's because rising chip stocks help the Nasdaq market. And the market does better when the Nasdaq is leading it higher. That was the case today. Not only were the semiconductors the day's strongest group, the Nasdaq led Friday's advance. Chart 1 shows the technical improvement in the Semiconductor Holders (SMH). The chip ETF closed decisively above its 200-day average for the first time since last spring. Volume was also strong on Friday's price gain. The SMH:SPX relative strength line shows that semiconductors are leading the market higher for the first time since last September. That's good for both.
Chart 1
INTEL AND NOVELLUS LEAD CHIP RALLY ... Two of the day's leading chip performers were Intel and Novellus. Novellus gained 7% and was the top percentage gainer in the Nasdaq 100. The stock is moving up to challenge its early December. And it's doing it on very strong volume and a rising relative strength line. Intel was the top percentage gainer in the Dow and, because of its size, also had a big influence on the Nasdaq market. The chip bellwether closed decisively over its 200-day moving average on good volume. Its relative strength line has turned up as well.
Chart 2
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TEXAS INSTRUMENTS BREAKS OUT ... One of the chip leaders that I showed last Friday was Texas Instruments. It continues to be a leader this week as well. Its daily chart shows the stock closing above its early December peak to reach the highest level in eight months. Its relative strength line is rising as well. National Semiconductor, which broke out last Friday, continued to gain ground this week as did its relative strength line.
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NASDAQ 100 SHARES END WEEK ON UPNOTE... The Nasdaq 100 has been the weakest part of the market. It's also been testing some important support levels. For one thing, the QQQQ has been trading dangerously close to its 200-day moving average. For another, it's been testing its October peak at 36.47 (see green line). It had also retraced close to 50% of its August-December rally. That's why it's important that the QQQQ continues to find support in this area. So far it has. It's still trading well below its 50-day average. But it led Friday's advance on decent volume. And its daily MACD lines have turned positive. Unfortunately, its relative strength line is still in a downtrend. Some more leadership from the Nasdaq would go a long way in helping to extend the current market rally. Today's strong chip action is a step in that direction.
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NEW YORK TRADERS EXPO TOMORROW... The annual New York Traders Expo is being held at the Marriott Marquis hotel in New York starting tomorrow (Saturday, February 12) through next Tuesday. Martin Pring and myself are giving a presentation tomorrow (Saturday) morning from 8:00 to 12:00 am. We'll be looking at the big picture in the market including a lot of intermarket analysis and sector rotation strategies -- and Elliott Waves among other things. For more info on tomorrow morning or the entire show, go to www.intershow.com. I hope to see some of you there.
