A CRACK IN ANOTHER PILLAR SUPPORTING THE MARKET BECOMES OBVIOUS
Over the past week I have been mentioning some of the important pillars of the current bull market that have suffered cracks. These cracks are by no means fatal. They are just indications that some reinforcing of the foundation needs to take place before we can attempt to move higher.
I discussed one of the cracked pillars - the small caps (IWM) - last night. I've also discussed the Dow Transports, which caught a little more downside pressure in today's market action.
Now we can add the SOX to that growing list of important market components that are creating a shaky foundation from which this rally will likely falter and grow into a muddled mess of sorts over the next couple of months.
Here is a look at the SOX on a monthly and daily basis. I wanted to zoom out to give an idea of the important level that it is sparring with currently:
click chart to enlarge
SOX MONTHLY
SOX DAILY
The information that the SOX is relaying to us simply gives further confirmation of the choppy and disorganized nature of the market that is to come. The easy money was made in January and February. It will become more difficult from here.
The edge, however, continues to be with the bulls. And that is exactly why I remain with little cash reserves and long a variety of small-cap names.
Bottomline: I'm willing to ride out this chop in exchange for being invested in the bigger picture.
