We Got a Pullback – Now What?

The move off of the March bottom was very sharp and did not offer any entry points with decent stop loss points.

We appear to be in the transition phase from Bear to Bull. It may take another few months before we get a sustained rally, or it may just gather strength from here. Only time will tell on that.

I see more setups than I have seen since 2006.

The good is focused in Technology, Commodities/Energy and Commodity-based Economies. That is where I am focusing.

New Bull Markets have ALWAYS been led by Semiconductors, Materials and Financials.

New Bull Markets ALWAYS begin when the news is terrible, just as Bull top on the best of news.

Here are some decent looking charts –
Semiconductors (SMH)
Even though price is still where it was in October, the SMH has had over 5 months to repair the damage of the Bear Market.
There is a ton of volume now directly below the current price (Green Line and Arrows) and the 50-day is now curling up (Black Line), offing support to price.
There is very little volume between here and $27. That means there are few people who will be getting back to even and looking to sell on a rally.

Applied Material (AMAT), Intel (INTC), Lam Research (LRCX), Varian Semi (VSEA), MEMC (WFR) and Atheros (ATHR) all look the same as SMH

Nvidia (NVDA) and Sandisk (SNDK) look better, with the 50 day and the 200 day about to cross (that is the definition of a Bull Market

Texas Instruments (TXN), National Semi (NSM), and Maxim Integrated Circuits (MXIM) are very close to breaking out

This is the first time in a long time that so many members of the group have looked so potentially bullish. This setup may still require a few more months, but I am getting to the point where I am considering scaling into positions a little at a time for the next few months.

Software (SWH) looks similar

Internet Stocks look even better (HHH)

Materials (the raw materials that go into a building)
Steel (SLX) looks a lot like SMH

So do Oil Service companies (OIH)

And so do Commodity-Based Economies (ILF)

Asia Ex-Japan and China look similar

At some point, Big Money is going to come in and either rip this stuff to the upside on massive volume, or tank it again on massive volume.

I will use Long Term Relative Strength charts to keep me in lock step with Big Money and what they are buying.

I will show you Relative Strength in my next post.