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Bulls lack some intestinal fortitude

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One sector in technology I've had my eye on today are the semiconductors and the Semiconductor Index (SOX.X). Some of the weaker technology sectors like the Biotech Index (BTK.X) 440 +4.93% and GSTI Software Index (GSO.X) 133 +3.1% are leading today's NASDAQ gains. However, the stronger Semiconductor Index (SOX.X) 530 +2.73% is lagging a bit and bulls were unable to rally the sector higher above its 200-day moving average.

While this is a short-term observation, it certainly hints that the bulk of today's gains are from short covering and not necessarily created by euphoric bulls calling a bottom.

Semiconductor Index Chart - Daily Interval

For a true bull rally to be taking place, I would have expected one of the stronger technology sectors in the semiconductors to have show more bullishness.

Instead, the larger gains from technology have come from those sectors and stock that either traded fresh 52-week lows or have been severely sold lower in recent weeks.

This type of action is indicative of short covering and not a lot of bulls committing new cash to the market.

The bond market is now closed and Treasuries were little changed. The YIELD on the 10-year ($TNX.X) actually finished marginally lower at 5.091%. It's interesting to note here that the upward trend from the November lows actually served as YIELD resistance this morning with YIELD higher at 5.128%. The longer-term 30- year YIELD ($TYX.X) also finished marginally lower today.

The shorter-end had the 13-week YIELD ($IRX.X) and the 5-year YIELD ($FVX.X) edging higher. In all, it sure looks like money stayed in Treasuries today, despite some gains in stocks.

Jeff Bailey
Senior Market Technician
Option Investor

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