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Semiconductors souring, has NASDAQ-100 seeing red

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In what had been an otherwise bullish session, a fractional dip into the negative territory by the PHLX Semiconductor Index (SOX.X) 374.67 -1.99% has started to build to the downside on an intra-day basis and has the NASDAQ-100 Index (NDX.X) 1,189.44 -0.77% falling into negative territory in this afternoon's trade.

Semiconductor names pacing the declines has Advanced Micro Devices (NYSE:AMD) $6.90 -5.35% falling back below its 21-day and 50-day SMA's and looks to test a still trending lower 200-day SMA of $6.62. Also exhibiting weakness are National Semiconductor (NYSE:NSM) $23.93 -4.12%. The only news I see to "explain" today's lower trade in the Advanced Micro (AMD) is Bank of America downgrading AMD to "sell" from "neutral" base on their belief that AMD's Q2 is tracking below expectations, and that the company will continue to face an uphill battle to gain market share against industry bellwether Intel (NASDAQ:INTC) $20.57 -1.15%.

Here's a quick look at my U.S. Market Watch index/sector screen from q-charts, which earlier today shows the bulk of my sectors in the green, but now seeing some fractional build of sector losses.

U.S. Market Watch

Today isn't the "first time" we've seen broader bullishness find some weakness intra-day, and it would be way too early to be "calling a top." However, as noted in Friday evening's market monitor, the NASDAQ-100 Bullish % ($BPNDX) rose to 84% and this afternoons slight round of profit taking wouldn't be considered "out of the norm" and bulls would be well advised be taking some gains off the table.

The S&P 100 Index (OEX.X) 486.95 +0.77% did fall back below the 488-489 level and that had me advising bulls from my 481 bullish trade to move to the sidelines and look to garnish profits near- term as I now must assess downside right back to the 481-482 area on a near-term basis.

In this weekend's Ask the Analyst column, we looked at the sector bell curve and compared it to a prior Ask the Analyst column in March, right when the major market indexes were reversing from their then relative lows.

We perhaps get the "feel" based on observation that the balance of RISK has shifted to the BULLS having the greater level of risk.

I would love to be able to "call a top" in a market with certainty, however, I know of know way to really do this. However, as traders, we can perhaps see that the best way to control the risk in our account right now, especially from the bullish side of things, is to have more of a short-term view of things as at some point, we would expect more of an intermediate to longer-term type of "RISK removal" of bullishness to be taken in the various sectors and major market averages.

I still feel the bullish % are perhaps the BEST indicator for understanding RISK and market internals. As good as this indicator is, it is VERY difficult to find intra-day weakness at a high. At least at this point. Thus, the best way to mitigate bullish RISK is to keep more of a short-term view from the bullish side of things, take what the market gives us, and use the pivot analysis levels to try and initiate any bullish entry points, but more importantly exit points when a trade has turned profitable.

Jeff Bailey

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