The Yahoo! chart here for the Semiconductor HOLDRs (NYSE: SMH) and SPDR S&P Semiconductor (NYSE: XSD) have just not been able to keep up with the S&P 500 measured here by the SPDR S&P 500 (NYSE: SPY) ETF.
If you look further on, the Semiconductor HOLDRs (NYSE: SMH) chart from StockCharts.com explains more of the issue. We did not show it, but the SPDR S&P Semiconductor (NYSE: XSD) chart looks the same on the moving average front.
It is the 50-day moving average acting as an overhang. After the 50-day moving average was violated in early March it killed the momentum. Now that shares have recovered it is obvious on the overhang. We would like to note one key issue here: if semiconductors manage to rise early next week, technicians will be calling this a trend reversal and breakout. That is just how it works.
If semiconductor companies do not start issuing earnings warnings in the next few days, then it seems likely that the investment community will begin to believe that the chip companies have a better underlying business than what was being priced in.
JON C. OGG
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