EarningsBeats.com Digest for March 25, 2022
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Major Industry Leader Regaining Strength
On April 10th, 2013, the S&P 500 cleared overhead resistance from previous highs in 2000 and 2007. It ended the dozen year secular bear market. Since that time, no industry group has performed better than semiconductors ($DJUSSC). They are a very fast-growing industry that benefits tremendously from a strong economic environment - or
even the anticipation of one. Recently, U.S. equities have been volatile and downtrending, reflecting a lot of the concerns and uncertainties here in this country, along with issues around the globe. Money is rotating back into the semiconductor space, however, and that's a much more bullish signal about the economic conditions ahead. One thing to always remember is that the stock market bottoms well ahead of economic conditions. Take a look at the recent improvement on
the DJUSSC:
I'm going to give you two VERY critical resistance levels, that if cleared, would provide a ton of technical evidence that the bottom in U.S. equities is in (doesn't mean we might not retest those lows, however). The first is the breakdown in price in mid-January beneath the January 10th open of 8741.10 (shows up more clearly on a daily chart). The next is the reaction high close on February 9th at 8634.46. Let's also not forget that a possible
down channel could be in play (red-dotted parallel lines). I tend to review leading industries like semiconductors to uncover possible clues about the overall market and, if you look at that bottom panel, you'll see that the relative strength of semiconductors remains strong and is in a bullish uptrend. That's a VERY strong signal to me that it's unlikely that we'll see, worst case, anything more than a brief cyclical bear market in 2022.
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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