SEMICONDUCTOR LEADERS INCLUDE APPLIED MATERIALS, MICRON TECHNOLOGY, AND SANDISK -- FOREIGN STOCKS STABILIZE AS JAPAN REBOUNDS -- EMERGING MARKETS ARE OVERSOLD -- U.S. STOCK INDEXES EXTEND RALLY WHILE VIX STAYS BELOW CHART RESISTANCE

MORE SEMICONDUCTOR LEADERS ... My June 4 message showed the Market Vectors Semiconductor ETF (SMH) trading at a new 12-year high, and three semiconductor leaders which included Intel (INTC), KLA Tencor (KLAC) , and Texas Instruments (TXN). That group continues to lead the technology sector higher. Three more semiconductor leaders are shown below. Chart 1 shows Applied Materials (AMAT) nearing a test of its early 2011 peak around 16. An upside breakout appears likely. Its relative strength line (gray area) is also rising which shows new market leadership. Chart 2 shows Micron Technology (MU) having already broken through its 2010/2011 highs to achieve a bullish breakout. Its relative strength line is also rising sharply. An even stronger chart pattern belongs to SanDisk (SNDK). The weekly bars in Chart 3 show that chip leader having broken out to the highest level in seven years. Its relative strength line is also rising. Semiconductor leadership is a good sign for the technology sector, the Nasdaq market, and the market as a whole.

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Chart 1

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Chart 2

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Chart 3

FOREIGN STOCKS STABILIZE... Foreign stocks are showing some signs of stabilizing. Chart 4 shows EAFE iShares (EFA) trying to climb back above its 50-day moving average after bouncing off chart support along its April low. It's getting a lot of help from Japan. Chart 5 shows Japan iShares (EWJ) also bouncing sharply this week. That has taken a lot of pressure off global stock markets. Emerging markets remain the weakest part of the global picture. Chart 6 shows Emerging Market iShares (EEM) still in a downtrend, but stabilizing over the last week. That may be partially due to the fact that the 14-day RSI line (below chart) has reached oversold territory (below 30). Emerging markets have been hurt by the recent backup in U.S. bond yields, and hints of less bond buying by the Fed. It remains to be seen how they react to this week's Fed meeting.

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Chart 4

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Chart 5

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Chart 6

DOW AND S&P 500 CLEAR INTIAL RESISTANCE... Today's stock rally has pushed a couple of major stock indexes above initial resistance at their June 10 intra-day high. All three stock indexes bounced twice successfully off their 50-day averages earlier in the month which kept their uptrends intact. What's needed now is for them to climb above overhead resistance levels. Chart 7 shows the Dow Industrials trading just above initial resistance at 15300 which is a positive turn. Chart 8 shows the S&P 500 doing the same. The Nasdaq Composite is in the process of testing its June 10 intra-day high, as shown in Chart 9. A close above that initial barrier would strengthen the upturn in all three indexes. Volume, however, remains relatively light. That may be due to hesitancy on the part of investors who are awaiting results from tomorrow's Fed meeting.

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Chart 7

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Chart 8

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Chart 9

VIX INDEX REMAINS BELOW RESISTANCE... I wrote last Thursday about the importance of the CBOE Volatility (VIX) Index staying at low levels. That's because a rising VIX Index is usually associated with lower stock prices. Chart 10 shows the VIX having backed off from the resistance line drawn over its February high. That has enabled stocks to rally over the last week.

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Chart 10

WAITING FOR THE FED... I can't remember a time when so many global markets were awaiting comments from a Fed meeting. We've gotten to a point where comments from central bankers have become major market moving events. And that includes global bonds, stocks, and currencies. It shouldn't be that way, but it is. We can look at market charts to try and make intelligent decisions about which way they're going. Judging from those charts, U.S. stocks do seem to be improving. Investors seem a bit more optimistic going into tomorrow's meeting. Light trading, however, suggests that they're being somewhat cautious. I don't blame them.