Will Sister Semiconductor’s Other Shoe Drop?

Most of the past week, we focused on Semiconductors SMH.

We called our sister of the Modern Family “moody” and “artificially flavored green Jell-o.”

Coming into Monday we wondered if SMH would bring more goth or another round of popular culture.

Although Friday SMH had an inside trading day, we decided that the chance she’d turn from “Wonder Woman” to “Mistress of Gloom” was high.

With SMH down at one point nearly 2%, clearly, she chose gloom.

With the close under 106.63, which confirms a topping candle, we now wonder whether her other red shoe will drop.

On the Daily chart, we measure an approximate target for an instrument by looking at the high tick on the extended-up day, and then calculate about 10% of that number. From there, we subtract that 10% from the high price.

On March 21st, SMH made a high price of 110.60.

If we subtract 10% from that price, we could easily see SMH fall to 99.54.

That would mean SMH fails the 50 and 200-DMAs, which are about to have a bullish golden cross.

The good news might be that if SMH fails the 100.20 area (or where the 50 and 200-DMAs are, but closes above them), patient bulls might get a very low risk opportunity to jump back in.

Nonetheless, bulls must be patient.

Furthermore, it is possible that IWM along with Biotechnology IBB, Retail XRT and Regional Banks KRE all closed green because they were badly hammered on Friday.

Today’s action looks like money rotated into those sectors and out of SMH. However, before I’d load up long on anything, I’d wait for any of those 4 (IWM IBB XRT and KRE) to clear back over their 50-DMAs for a return from a bearish into a recuperation phase.

Basquiat focused on “suggestive dichotomies.” As such, you should focus on SMH’s red shoe and its suggested dichotomy from the rest of the economic Modern Family.

S&P 500 (SPY) Thursday a new swing high. Friday, a failure of Thursday’s low and a topping pattern on high volume in place. Monday, some digestion. Measured move is to 257 area.

Russell 2000 (IWM) 151.60 now resistance with support at 148.20, then 145.

Dow (DIA) 253.35 is the rising 50 DMA to hold

Nasdaq (QQQ) 178.45 first area to clear if this is to have some upside. Otherwise, measured move down to 164.

KRE (Regional Banks) Inside day near Friday’s low. Unless it clear 51.00, looks like more downside in store

SMH (Semiconductors) 106.63 is the immediate resistance. Otherwise, if cannot clear will wait for a move to 101-100 area

IYT (Transportation) Confirmed bearish phase. Not seeing the love yet

IBB (Biotechnology) Confirmed bearish phase 110.25 resistance and next support at 106.80 held today

XRT (Retail) Resistance at 44.50. Some support at 42.95, but if fails there, we are reversing a 10-year uptrend