Intraday Flash: SOX
Note: the following analysis is formulated as an assimilation of Fibonacci, DeMark, Elliott Wave and other technical indicators. It is offered as education and not intended as advice in any way.
The recent decline in the SOX index from the December 3rd peaks to the December 9th lows has taken on a "5" wave form. As regular readers know we have been waiting for a "5" wave decline to signal the possibility of a significant trend change (bearish) in the SOX, owing to our belief that the bounce in this index from the September lows has been corrective (counter trend), overlapped, and subject to reversal. This recent 5 wave decline has been followed by a (so far) three wave corrective bounce that is today entering into the heart of Fibonacci resistance in the 38.2% to 61.8% resistance area.
If our read of the technicals (Elliott wave pattern, short term DeMark indicators, and Fibonacci projections) is correct, then the SOX could very well find stiff resistance in the 433-438 area today and could turn down hard toward the next Fibonacci support level in the 398-400 area and potentially much lower if in fact the larger bearish trend from the Q1:04 peaks is re-emerging.
For now, we have high confidence in the short tem bearish trend because of the triangle correction that took place on 12/10 and 12/13: as regular readers know, triangle corrections tend to take place in B waves which means in this case that the move off the December 9th lows has taken on an ABC upward corrective bounce and, once complete, should result in the operative bearish trend that started on December 3rd re-starting.
Whether or not the larger (multi-week/month) bearish trend is starting again remains to be seen: only if support at the 398-400 area gives way would we be able to become more comfortable in that assessment. For now then, the short term interpretation suggests technical weakness in the SOX (or SMH) today anywhere in the 433-438 area (SMH $33.30-$33.80) for a potential move to at least new swing lows and more likely the next Fibonacci support area at 398-400 (SMH $30.60 +/-) (not advice). A move thru 446 (SMH $34.55) would negate the short term bearish view and force us to stand aside.
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