SOX Semiconductors Weekly Chart Overbot Negative Divergence Double Top 'M Top' Dramatic Collapse Correction Territory -16%

Semiconductors are in nearly every product you buy nowadays and are a key bellwether of economic health, or lack thereof. Perhaps most people that wanted and could afford a fancy smartphone or other electronics already own them. Computer wearables are an ongoing obsession with Silicon Valley start-up and existing tech firms. Google Glass received a lot of hype months ago but even those refining the design do not wear them daily. There are numerous watch devices on the market now and the Apple Watch blends into that unimpressive bunch.

Perhaps the strength in chips in recent months is due in part to semiconductor development for wearables, however, the computer wearables sector is receiving about as much enthusiasm as viewing Aunt Edna's vacation pictures, orthopoedic shoes and all. The only people interested in wearables are the programmers and designers employed, for now, in developing this junk that the majority of the public is not interested in.

All this inside baseball aside, the SOX, semiconductors, collapsed -10% last week now in full-on correction mode (a drop in excess of -10%). The SOX has fallen from 660 to 556, 104 points, -16%, in only about three weeks time. That's going to leave a mark. A bear market is -20% only four percentage-points away. The chart is sick but a dead-cat bounce will be needed as well as back kisses at the 50-week MA at 579 as well as the 20-week at 628 and rolling over to the downside. The back test of the 20-week may not occur until the moving average comes down in the 600-ish area as price moves higher.

Lower lows would be expected after any bounce move in this weekly time frame. Note the 560-ish is strong support from the spring time and it stopped the price collapse on Friday. The SOX topped out with a double top pattern, or M Top. The first peak received the negative divergence and overbot spank down due to the histogram, stochastics and ROC, however, the RSI and MACD line were long and strong (green lines) and wanted one more matching or higher price. That occurs with the second top. At that time the red lines show universal neggie d across all indicators making this a very simple text book top to call, and price collapses. The fall from grace is astounding since an initial pull back to 600-628 would have been more expected rather than a complete failure towards 550.

Copper is weak. Rubber is weak. Large machinery and equipment are weak. Chips are weak. YUM results weak. Economic bellwethers are painting a dire picture forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.