Morning Update- HGX,NDX, and SMH
The Housing Index - Philadelphia (HGX) - weekly chart
The strongest sector this week has been the housing index. Technicals look good. The weekly chart of the HGX shows that it is in a neutral symmetrical triangle pattern. It is in a wave 3 to 4 pullback and looks to be completing an ABC. Furthermore, the weekly HGX chart shows that it is in a failed topping pattern because it is making an irregular flat. An irregular flat occurs when wave C at 248.43 is higher than wave A at 231.61. Once we take out 273.00 - 275.00 we will have a full blown breakout. Once again, all indicators and oscillators are starting to turn up. This week the HGX is up 7.23% at 271.24 so far this week. All time frames are bullish on the HGX.
MTH which is in the portfolio is up 12% this week. MTH has all time high short interest at over 3 million shares, up over one million shares short a month ago. Fundamentals may be right, but what does that have to do with the technicals? That is what makes a market, there has to be someone on the wrong side of the trade. It appears a lot of traders will be on the wrong side of the trade in this stock as well.
The Nasdaq 100 (NDX) - Daily chart
Why is the NDX lagging? It has to do with the chips. If you look at the chart going back to April 2005, you can see that it has held it's uptrend line for the past year. As you can see from the chart, the lows held in April 2005 and then the lows held in October 2005. You can see that the NDX also made it's the lows on March 10th at 1634.25. As you can see, the NDX has rallied off of those lows and remains in the uptrend channel. Indicators show some whipsaw but also show some potential, the PPO is starting to look slightly bullish with some divergence, and stochastics have turned up.
Semiconductor Holders ETF (SMH) - Daily chart
The SMH daily charts looks very similar to the NDX chart. It appears to have held it's uptrend line for the past year. I would wait to trade the SMH until it hits the uptrend line and then bounces off it confirming that the lows are in. Indicators and oscillators are still bearish. Today the SMH is flat at $35.62.
