After tumbling hard last week out of severely overbought conditions (T2108 is now at a comfortably neutral 55%), the S&P 500’s slide has slowed against what looks like a sludge of apathy. Volume has quickly dried up since last Wednesday’s 2.8% loss and now stochastics suggest the S&P 500 is oversold. I suspect the stock market could rally simply because it becomes the path of least resistance as sellers continue to digest last week’s drama.
No quick technical review is complete these days without checking in on what Intel (INTC) is doing. The stock continues to stick to the bearish script. It is now back below the old downtrend and has essentially retested the July lows. Given the action since earnings, I continue to expect these lows will break sooner than later – I do not believe in triple bottoms.
*All charts created using TeleChart:
It is tempting now to declare so goes INTC, so goes the market. However, as I have pointed out before, INTC topped out within a year of the start of the last bull market. So, at most, INTC’s decline is indicative of a malaise spreading throughout the semiconductor space. For example, Applied Material (AMAT) is reaching support created last summer. The stock is down around 20% for the year.
Given the spreading deflation fears, soaring bond prices, and sinking stock valuations, I suspect there will be plenty of moments ahead where contrarians and value-seekers will send the market on rallies in a frantic effort to scoop up “bargains.” If past volume is any indication, these buyers remain a very small, specialized, and distinct niche component of the market.
Be careful out there!
Full disclosure: long SSO puts, long SSO calls