BIG TECHS LEAD MARKET HIGHER AS QQQ HOLDS UPTREND -- SEMICONDUCTORS AND NETWORKING STOCKS LEAD TECHS -- TXN AND INTC LEAD SEMIS -- CSCO AND QCOM POWER NETWORKERS -- FINANCE SECTOR AND REGIONAL BANKS LAG
BIG TECHS LEAD MARKET HIGHER AS QQQ HOLDS UPTREND... Link for todays video. Stocks moved higher on Wednesday with the Nasdaq 100 ETF (QQQ) leading the way. Chart 1 shows QQQ surging over 1% with a move above 64. With the four day advance, QQQ formed a higher low to keep the medium-term uptrend alive. As with many other major index ETFs, QQQ sports a series of rising highs and rising lows since early June. This is the definition of an uptrend. Despite this uptrend, QQQ may encounter resistance in the 64.5-65 area. Resistance here stems from broken support and the 50-61.80% retracement zone. QQQ has been turned back in this area twice since mid June. Perhaps the third time will be the charm. As far as the medium-term uptrend is concerned, the July low marks key support just below 62. The Percent Price Oscillator remains in bull mode because it is in positive territory. A move into negative territory would turn momentum bearish. Chart 2 shows the Dow Industrials SPDR (DIA) with a rising wedge and key support just below 125.

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Chart 1

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Chart 2
SEMICONDUCTORS AND NETWORKING STOCKS LEAD TECHS... The Market Vectors Semiconductor ETF (SMH) and Networking iShares (IGN) have been two of the weakest industry group ETFs since April. While todays bounces are impressive because of the percentage gain, these still look like oversold bounces within bigger downtrends. Chart 3 shows SMH testing the early June low with a spike below 30 on Tuesday. A hammer formed yesterday and todays long white candlestick confirms this hammer. While these two candlesticks are short-term positive, the medium-term trend remains down. SMH broke support around 33 and broken support turned into resistance in June. We need to see follow through and a resistance breakout to affect the medium-term downtrend. The indicator window shows the Percent Price Oscillator (PPO) set at (1,50,1). This measures the percentage difference between SMH and its 50-day EMA. At the June closing low, SMH was over 5% below its 50-day EMA. Also notice that breaks above the 50-day are relatively insignificant unless the ETF clears the moving average by more than 2.5% (red dotted line).

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Chart 3
Chart 4 shows the Networking iShares (IGN) falling around 25% from the early April high to the mid June low. The ETF consolidated in June, but then continued lower in July and recorded a new 52-week low on Tuesday. This is clearly a long-term downtrend. IGN was oversold when trading at 23 and an oversold bounce is normal at this stage. A hammer formed on Tuesday and the ETF surged over 3% today. I still view this as a short-term bounce within a bigger downtrend and expect resistance in the June consolidation.

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Chart 4
TXN AND INTC LEAD SEMIS... Within the semiconductor group, chart 5 shows Intel (INTC) surging off support in the 25 area. Support here stems from broken resistance and the 61.80% retracement. It is possible that the entire decline is a correction within a bigger uptrend, but Intel has yet to reverse the decline that began in early May. Also notice that Intel shows relative weakness overall as the Price Relative hit a 2012 low last week. I am marking resistance at 27. Chart 6 shows Texas Instruments (TXN) breaking to new lows for 2012 last week, but recovering with a surge above 27.50 on Wednesday. Even though this may be a bear trap, the trend is clearly down and TXN shows persistent relative weakness. Key resistance is set at 29.

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Chart 5

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Chart 6
CSCO AND QCOM POWER NETWORKERS... Chart 7 shows Cisco (CSCO) firming near its prior low and then surging above 16.50 on Wednesday. It is possible that a double bottom is taking shape, but a move above the intermittent high is needed for confirmation. CSCO still shows relative weakness as the Price Relative sank to a new low for 2012 last week. Chart 8 shows Qualcom (QCOM) trending lower since the big down gap in April. The stock broke above the April trend line with todays surge above 56. Follow though is needed to break the early July high and consider a trend reversal. Also note that QCOM remains relatively weak as the Price Relative trends lower.

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Chart 7

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Chart 8
FINANCE SECTOR AND REGIONAL BANKS LAG... The Finance SPDR (XLF) and the Regional Bank SPDR (KRE) did not participate in Wednesdays market advance as both declined modestly. Both remain in uptrends for now, but chartists should watch key support levels closely. Chart 9 shows XLF surging above 14.60 on Friday and then stalling the last three days. As with many ETFs, the trend since early June is up with a rising wedge is taking shape. XLF met resistance in the 50-61.80% retracement zone in early June and is once again challenging this area. The July low marks key support at 14.20 and the medium-term uptrend rules as long as this level holds. A break below 14.2 would reverse the rising wedge and call for a continuation lower. The indicator window shows the XLF:SPY ratio moving higher since early June, which means XLF has been outperforming SPY. A break below the July low would end this period of outperformance.

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Chart 9
Chart 10 shows the Regional Bank SPDR extending its uptrend with a surge above 27.5 last Friday. The ETF, however, did not follow through on this surge and fell back on Wednesday. Nevertheless, the trend since early June remains up with the July low marking key support.
