ALTERA AND INTEL LEAD CHIP BOUNCE ON FRIDAY -- BIOTECH ETF FINDS SUPPORT AT 50-DAY LINE -- TRANSPORTS HOLD 200-DAY LINE -- RAILS AND DELIVERY SERVICES ARE ALREADY IN DOWNTRENDS -- PULLBACK IN OIL BOOSTS AIRLINES ON FRIDAY
ALTERA AND INTEL LEAD CHIP BOUNCE... Semiconductors fell sharply on Wednesday and Thursday, and weighed heavily on the technology sector. Chart 1 shows the PHLX Semiconductor iShares (SOXX) falling all the way back to its 200-day moving average by Thursday. A big jump on Friday, however, pushed the SOXX up to its 50-day moving average. Most of the Friday bounce, however, came from two stocks -- Altera and Intel. Reports that Intel is nearing a purchase of Altera sent both stocks surging. Intel surged 6% (Chart 2) while Altera (Chart 3) exploded 28%. Xilinx (a competitor of Altera) jumped nearly 6%. So it remains to be seen if Friday's chip bounce was just a one-day event or a sign that the correction has run its course. Chart 2 shows Intel bouncing off potential chart support formed last October. That would be a logical spot for the chip bellwether to try to recover. Intel carries a lot of weight in the chip space. It's the third biggest holding in the SOXX (8%) and the top holding (17%) in the Market Vectors Semiconductor ETF (SMH).
(click to view a live version of this chart)
Chart 1
(click to view a live version of this chart)
Chart 2
(click to view a live version of this chart)
Chart 3
BIOTECH ISHARES BOUNCE OFF 50-DAY LINE... Another pocket of weakness bounced on Friday. Chart 4 shows Biotech iShares (IBB) climbing nearly 2% on Friday. It also survived an initial test of its (blue) 50-day moving average and a rising support line drawn under its October/February lows. Friday's bounce, however, came on the lowest trading of the week and followed a couple of days of heavy selling. The weekly bars in Chart 5 show this to be the worst combination of falling prices and rising volume for the IBB in nearly a year. The 14-week RSI line (top of Chart 5) is also starting to roll over from overbought territory over 70. That suggests that biotech stocks may have more volatility ahead. The IBB is still 15% above its (red) 40-week moving average.
(click to view a live version of this chart)
Chart 4
(click to view a live version of this chart)
Chart 5
TRANSPORTS HOLD 200-DAY LINE... Transportation stocks also survived an important test of support this week. Chart 6 shows the Dow Jones Transportation Average bouncing off its 200-day moving average on Friday. It is also trying to find support along its first quarter lows. That's a very important test for the transports and, possibly, for the rest of the market. It's not a good sign to have economically-sensitive transportation breaking major support levels. The biggest transportation losers are rails (Chart 7) and delivery services (Chart 8) both of which are already in chart downtrends. Airlines and truckers are holding up better.
(click to view a live version of this chart)
Chart 6
(click to view a live version of this chart)
Chart 7
(click to view a live version of this chart)
Chart 8
AIRLINES AND TRUCKERS TEST SUPPORT ... Truckers have held up much better than the rails. Chart 9, however, shows the Dow Jones US Trucking Index backing off from its December high and in the process of testing its 50-day average and early March low. Airlines have held up best of all. Chart 10 shows the Dow Jones US Airline Index bouncing off chart support along its February/March lows. Friday's airline bounce was aided by a pullback in crude oil (black line). Airlines are the most sensitive to the direction of the price of fuel.
(click to view a live version of this chart)
Chart 9
