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Reality Check Charts
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Technical Review: Semi-Conductor Index (SOX) analysis of the intermediate term chart:

With the media’s almost perpetual bullish interest in, and influence over investor’s over the semi-conductor sector, the chart above shows a more objective picture.

The following points are worth considering before buying into their exhilaration:

Since the first week of October, 1998, the index has moved up from a low of 182.59 to today’s high of 655.77, better than a 300% gain. This assures us that this is NOT the beginning of a new trend.

The price movement has remained defined within what is known as an ascending diagonal triangle, and has moved to the top of the upper resistance line, toward the apex of the triangle. This is considered (in Elliott Wave terms) to be a VERY high probability of a termination point for the entire move.

This is labeled as very near the end of an entire 5 wave move from the 10/98, 182.59 low.

Prices have moved above the dashed upper resistance line. This may be known in Elliott terms as a 5^th wave throwover. This only occurs within the termination phase and lends credibility to the other evidence that the move is ending.

The lower indicators, Stochastics, RSI and Rate of Change (ROC) all show lower highs, confirming that while prices have moved higher, they are consistently losing upside momentum, diverging negatively against the rising price.

While prices can always push further into new high territory, does it make any sense to chase after an investment that has surged 359% in just one year? Some believe it does. We do not.

The evidence suggests that the continuation of the move is already in jeopardy of ending now. We advise caution as prices and sentiment do not support further optimism. For those who would choose to stay with the trend as long as possible, we would use a mental stop at the 11/4 minor low at 595. This leaves plenty of room for the trend to consolidate without being stoppe3d out pre-maturely. For those with a longer time horizon, a decline below the last minor wave "i" high at 566.58 may be used, as a price decline is not allowed to overlap (also according to Elliott rules of analysis) if the trend is to remain in force.

We hope this helps keep emotions in check.

              Market Trend Realities (MTR) is a Registered Investment Advisory which manages personal, corporate, Trust, and retirement accounts on a fee only basis. Several low cost, flexible management fee arrangements are available. Investment Advisor, Mitch Harris has studied the Point & Figure Charting Method under the direct supervision of Michael Burke, Editor of the prestigious Investors Intelligence research organization. Management is based on a unique combination of technical analysis methods and tools which include, The Point & Figure charting method, Elliott Wave Analysis & techniques, industry group analysis, cycle analysis, Relative Strength Analysis, Stochastics, and investor sentiment studies. MTR offers a very uniquely structured managed mutual fund program using the RYDEX family of mutual funds, which offer outperformance potential whether equity markets are rising OR falling! Inquiries are welcome by calling us at (513) 421-8737, or by email at: mtr@fuse.net