Should We Be Worried About The Lack of Confirmation in Semiconductors?

There seems to be a lot of discussion on Twitter and StockTwits about the lack of confirmation breadth after the rise in equities last week. Some even noting some fairly bearish charts for the Nasdaq going back to the dot-com bubble peak. While it seems many other great traders and bloggers have discussed the breadth issue, most notably my good friend Ryan Detrick. One piece of data that’s also lacking a confirmation signal is one I’ve referenced a couple of times in the past – semiconductors.

While the S&P 500 ($SPX) got within spitting distance of its prior closing high, we did not see the same level of bullishness in the Semiconductors Index. Back in December I wrote an article titled, “Dr. Copper Has Been Replaced” in which I made the argument that Copper has been replaced by Semiconductors as a better barometer of market risk taking. While I don’t expect Semi’s to go in lock-step with the overall equity market, the current lack of confirmation is quite discouraging.

The news today will largely be focused on Apple’s earnings and the large gap down that the stock appears (as of the time of this writing) to be taking. While many great traders were pointing to the lack of breadth confirmation earlier in the week others were pointing to the strength in tech names like Apple and Google as a sign that the sky is still clear. As Apple experiences a kick in the teeth, I wonder if this increase in weakness in semiconductors was a bit of foreshadowing for the tech giant…

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.