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Advanced Technical Analysis - SOX

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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.



In my July 15th note I suggested that if the 410-415 area was going to hold as support for the SOX, price momentum to the downside would need to slow measurably over the following several sessions. Since 7/15, that is precisely what has happened: in those 7 sessions prices have basically been volatile in the range of 405-425 with the downtrend from 6/30 to now showing some of the more classic of the bottoming indicators I look for. Specifically, I am seeing substantial positive hourly momentum divergences, seeing hourly Demark trend exhaustion indicators, and most importantly can see a reasonably clear end to the impulse move down from the 6/30 peaks.

There is no change to the long term daily and weekly charts that I have discussed in the previous two notes (please see my notes dated 7/1 and 7/15 respectively). There is a change however in the short term interpretation (hourly chart). Specifically, the price action from the May peak to present is open to three real interpretations: two of which are bullish in the intermediate term, the other is bearish in the intermediate term. Most importantly however is that all three of these interpretations of the move down from the May peak call for a bounce very soon to "balance" the decidedly oversold nature of this index. Specifically, I am looking for one more up-down sequence to end in the 400-405 area in the SOX in the next session or two (that is today or Tuesday) to complete at least the move down from the 6/30 peak that could lead to a bounce to at least 435 if not higher (depending on the intermediate term trend).

Given that, I see an uptrend that could begin at that new swing low, unless levels continue to decline through 395. Any move above Thursday's peak of 422.58 could suggest the expected bounce was already underway. Ideally we will see one more up-down sequence into the 400-405 area before assuming a major uptrend for at least an oversold bounce, if not a potentially important trend change to new highs. For now I'll keep my sights on the short term and let those short term technical data points accumulate and lend greater clarity to the intermediate term trend.

No positions in stocks mentioned.

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