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QE Fatigue Spreads from Transports to Semiconductors

Stocks in this article: FDXNSCSOXCAT

Analysis of the euro vs. the dollar (1.2911): The weekly chart stays positive today with a close above the five-week modified moving average at 1.2700. My semiannual pivot remains at 1.2917.

Analysis of the Dow Industrial Average (13,486): The weekly chart remains positive but overbought with the five-week modified moving average at 13,268. My annual value level lags at 12,312 with an annual risky level at 14,032.

Analysis of the Dow Transportation Average (4941): The weekly chart stays negative on a close today below its five-week modified moving average at 5075. My semiannual value levels are 4449 and 4129. A new year to date closing low below the current closing low at 4847.73 set on June 4 would be a Dow Theory Sell Signal. Keep in mind that Dow industrials generated a Dow Theory Buy Signal with a new 2012 closing high at 13,596.93 set on Sept. 20. This tug of war continues.

Analysis of the S&P 500 (1460.3): The weekly chart remains positive but overbought with a close today above the five-week modified moving average at 1422.2. My annual value level lags at 1363.2 with annual risky level at 1562.9.

Analysis of the Nasdaq (3137): The weekly chart remains positive but overbought with a close today above the five-week modified moving average at 3085. My annual value level is 2698 with my annual risky level at 3232.

Analysis of the Russell 2000 (843.54): The weekly chart remains positive but overbought with a close today above the five-week modified moving average at 827.66. My annual pivot remains at 836.15 with the all time at 868.57 set on May 2, 2011.

Analysis of the Semiconductor Index or SOX (385.46): The weekly chart shifts to negative on a close today below the five-week modified moving average at 395.54. My semiannual value level is 326.30 with the Sept. 14 high at 410.82.

It appears that QE fatigue is spreading the SOX as shown on the daily chart below. The chart shows the quick deterioration from the Sept. 14 high at 410.82 then the break of the 50-day and 200-day simple moving averages on Sept. 24 to a low of 372.00 on Sept. 26.

The SOX is still below its 50-day and 200-day simple moving averages at 392.23 and 395.73. The decline from high to low totaled 9.5%, which is a significant divergence given the hype of QE3, and is thus the next symptom of QE fatigue.

Source: Thomson/Reuters

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.
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