Semis Look Sick

Click on graphic to enlarge

Unfortunately, this graph is not a clear we would like. It does give some indication on the condition of the recovery in general, as semiconductors are considered a leading indicator.
Notice the RSI shows declining strength and the MACD is also weakening as shown by the red arrows. There certainly could be a pullback to the 200 day EMA, in my view. This may also give us some indication of the degree of the correction in the market that some of us have been expecting.

If the correction occurs as semis indicate in the 15% range, we could be looking at the S&P in the 950 range.
Of course, there is the possibility of a break through the 200 day EMA, the recovery will fall over a cliff and generate another crisis. We will not consider that possibility as this point.

The question I ponder, is will a correction of this magnitude be enough to encourage Mr. Bernanke to juice the money supply with his printing presses?

Will the reinflation policy of the Fed and Treasury be enough to overcome the massive deflationary forces that have been unleashed?


  1. PW, yields are negative on short-term treasuries. What does it mean when yields are negative? Is that cause for concern?

  2. I will answer this question in my next post.


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