Tuesday, May 7, 2013

Technology today

In a market that relentlessly pushes higher on a daily basis it's hard if not impossible to find any area of potential weakness.  Small caps had a strong day and the Dow Transports tacked on another 99 points on top of yesterday's 99 points.

Commodities were mixed on the day but I believe some cracks are starting to manifest themselves in the Technology space.  Here's a daily chart of the Philadelphia Semiconductor Index ($SOX) which gapped up on Friday:

(click on chart for larger image)
 
Even on the gap up (parallel brown dashed lines) the candlestick on the day denoted a failure to rally after the initial surge.  Here's the Technology Select SPDR ETF (XLK) traded on the NYSE:
 
 
 


(click on chart for larger image)
 
Notice the same gap but check out the volume at the lower part of the chart (white arrow).

And here's the NASDAQ 100 ($NDX):

(click on chart for larger image)
 
Same characteristics as XLK above...

The street's been touting how Technology has been leading the latest leg of this rally.  They better hope this is just a "pause that refreshes).  To me, it looks like we're setting up for an island reversal.  Watch for the gaps to be filled.  It might be the signal that we're going to get at least something that looks like a correction.