Afternoon Update-SPX, OIH, and SMH

The S&P 500 Large Cap Index (SPX) - Hourly chart
The SPX is currently in an ABC correction in a wave (3) to (4) pullback. It appears that wave (4) has been put in and the SPX is reversing higher. The stochastics on the hourly chart have been oversold all month. However, The PPO is showing bullish divergence indicating that a reversal to the upside is possible. At this time you either play nothing or play the long side. If the SPX goes below 1246, that would be confirmation that the SPX would be headed lower. Remember bulls live above 1246. As far as a reversal down in the broader market occurring it will need more sectors participating in that down move and they are simply not.


Oil Services Holders ETF (OIH)- Weekly Chart
The weekly chart of the OIH shows that it has been in a strong bullish trend reversal for the last 2 years. However, I believe a correction is beginning that will last weeks and it may be drop of 30 points or so. I don't know yet whether it will be a minor or major correction but a correction nevertheless. I also want to point out that the highest volume occurred the week that the top was put in. That in itself is a bearish signal. Chances are the OIH will back test the trend line around 130 before there is a single bid within the stocks.

Semiconductor Holders ETF (SMH)- Weekly Chart
Surprisingly enough, the SMH is now outperforming the PPH and the OIH. The weekly chart shows that the SMH has been trading in an uptrend channel since September of 2004. You may also notice that the moving averages are starting to cross over. This is a bullish signal. Furthermore, the indicators and oscillators are in a bullish trend reversal. The SMH is up 3.41% this week at $38.36. The bottom-line is that we just want to stick with the strongest sectors. I believe higher beta stocks and riskier sectors will be the best performers.