Friday, August 1, 2014

The Fate of the Stock Market Rests with One Stock: SOX

Semiconductors have fired a warning shot.
As the S&P 500 hovers near its all-time high, the semiconductor sector is taking a nosedive.
The Philadelphia Semiconductor Index (the "SOX") fell nearly 4% last week. Individual semiconductor stocks fared even worse. Qualcomm (QCOM) declined 6%. Applied Materials (AMAT) fell 8%. And Maxim Integrated Products (MXIM) plunged 13%.
Semiconductors tend to lead the market. So this could be the first sign of trouble...
Take a look at this chart of the SOX...
Last week, the SOX broke below its 50-day moving average (DMA). Most technical analysts view the 50-DMA as the "line in the sand" separating intermediate-term uptrends from intermediate-term downtrends. So when an asset is trading above the 50-DMA, it's bullish. When it's trading below the 50-DMA, it's bearish.  (more)

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214 Years Of Sovereign Defaults In One Chart

From 1800 to 1950, Argentina had been a relatively low frequency ‘defaulter’, but as the following chart fromThe Economist shows, since then (as we noted here) they have made up for it.
Argentina has defaulted on its external debt seven times and on its domestic debt five times since independence almost 200 years ago, putting it somewhere in the middle of the historical ranks of the world’s serial defaulters.
However, as WSJ notes, a long history of economic booms and busts have scarred the national psyche and left external creditors wary as the country hovers on the edge of  its second default of the 21st century.
Argentina first defaulted on its sovereign debt in 1827, just 11 years after declaring independence from Spain.
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Chart of the Day - Supervalu (SVU)

The Chart of the Day belongs to Supervalu (SVU). I found the stock by sorting today's New High list for new high frequency in the last month, it signaled a buy on 5/12 the stock gained 28.69%.
SVU is one of the nation's largest supermarket retailer and largest food distributor. The company conducts its retail operations under three principal store formats: price superstores, under such retail banners as Cub Foods, Shop `n Save, Shoppers Food Warehouse, Metro and biggs. Also, the company sells food and non-food products at wholesale throughout the United States to retail food stores, mass merchants and through other logistics arrangements. The company's plans include growing its retail operations through new store development and acquisitions.

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Wells Fargo & Co (NYSE: WFC)

Wells Fargo & Company provides retail, commercial, and corporate banking services to individuals, businesses, and institutions. The company’s Community Banking segment offers checking and market rate accounts, savings and time deposits, individual retirement accounts, and remittances; and lines of credit, auto floor plan lines, equity lines and loans, equipment and transportation loans, education and residential mortgage loans, and credit and debit cards. Its Wholesale Banking segment offers commercial loans and lines of credit, letters of credit, asset-based lending, equipment leasing, international trade facilities, trade financing, collection, foreign exchange, treasury management, investment management, institutional fixed-income sales, interest rate, commodity and equity risk management, insurance, corporate trust fiduciary and agency, and investment banking services, as well as online/electronic products. The company’s Wealth, Brokerage, and Retirement segment offers financial advisory, wealth management, brokerage, retirement, trust, and reinsurance services.
Take a look at the 1-year chart of Wells Fargo (NYSE: WFC) below with added notations:
1-year chart of Wells Fargo (NYSE: WFC)
WFC has formed a trend line of support (blue) since its October bottom. Always remember that any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its relevance. WFC has tested its trendline support 3 different times. In addition, the stock also has a regular level of support at $50 (green) that sits just below the trendline.

The Tale of the Tape: WFC has a trendline support and a slightly lower $50 support. A long position could be entered on a pullback down to the trendline/$50 support area. A short position could be entered if WFC were to break below the trendline/$50 support area.
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A Tipping Point in Europe? Would It Impact the US?

Three popular stock indexes in Europe are giving multi-year rising support a heck of a test of late. Each index may have created a rising wedge, which two-thirds of the time suggests lower prices are ahead.
Argentina, with its potential default of debt, seems to be in the news this morning. In my humble opinion, what Europe does from here is VERY important!
IF ... If Europe is reaching a "tipping point", this price action very well could ripple into the S&P 500. Europe exhibited similar behavior in 2000 & 2007. Stay tuned!
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