The NYSE Composite currently stands as the market leading major index as it holds above 10-dma support and near its own all-time highs. Meanwhile, the marginally less tech-centric S&P 500 gave up on an early Friday rally before reversing and going tail-up from a point near 50-dma resistance. Despite the divergent action in the non tech-centric NYSE Composite, there is nothing that looks particularly appetizing on the long side of the market in areas away from tech as the market correction continues.
Clearly, the brunt of the selling has been centered in the AI-related semiconductors and other big-stock techs, but as we noted several weeks ago in our Weekend Review reported date July 4th, many AI-related areas of the market were already showing signs of weakness as early as May. The Market Direction Model switched to a SELL signal on July 13th once the weakness began push the NASDAQ Indexes below 50-dma support and it has mostly been all down from there.Big-stock semiconductors that we reported on during their massive uptrends in April through mid-June/early July have come apart, and in typical O'Neil short-selling style have provided a very convenient list of short-sale targets as these prior leaders have broken down. Among those shown below, we see Applied Materials (AMAT), Micron Technology (MU), Nvidia (NVDA) and Seagate Technology (STX) triggering short-sale entries as they broke 50-dma support on Friday.
Semiconductor earnings will remain brisk this week as Tuesday after the close big-stock semiconductors KLA Corp. (KLAC), NXP Semiconductors (NXPI), Qorvo (QRVO), Seagate Technology (STX) and Skyworks Solutions (SWKS) are expected to report. Things get even more lively for the semiconductors as we expect recent ADS entrant to the U.S. markets and big-stock Korean memory chip maker SK hynix (SKHY) to report at 9:00 AM on Wednesday morning Korea Time which equates to 5:00 p.m. Pacific and 8:00 p.m. Eastern in the U.S. Thus, the stock's impact will likely be felt overnight in the EXTO session where many U.S.-based big-stock semiconductors trade all night long. After the close on Wednesday, we expect earnings from Arm Holdings (ARM), Lam Research and Qualcomm (QCOM).With respect to SKHY, which was subject to much hype when it began regular-way trading in its newly NASDAQ-listed ADS shares two Mondays ago, we can see that in fact the stock triggered a short-sale entry at it busted 50-dma support just as the ADS shares began trading on a when-issued basis three Fridays ago.
On Thursday, Intel (INTC) reported earnings and rallied as high as 113.72 in the after-hours on Thursday evening before rolling over back below 20-dema support at 108.74. during the ensuing conference call. It ended the after-hours session at around the 102-103 area but then plunged back below the 10-dma on Friday morning where it flashed a short entry signal at the line. Since failing on its second breakout attempt in late June, INTC has played out as a textbook Late-Stage Failed-Base (LSFB) short-sale set-up which was quite easy to see if one was not in denial and insistent that there was no bubble in the space. The brutal sell-off in the space says it all.
With earnings expected from several big-stock semiconductor names as well as big-stock NASDAQ names Meta Platforms (META) and Microsoft (MSFT) on Wednesday and Apple (AAPL) and Amazon.com (AMZN) on Thursday, all after the close, along with the latest Fed policy announcement on Wednesday and the continued re-escalation in the Iran War, the market is faced with a number of catalysts that may add to the overall bearish tone of the action. For now, as we have advised, caution and cash remain your best allies.The Market Direction Model (MDM) remains on a SELL signal.