$$ Weekly Tech Report

Jan 25-29, 2010
For the annotated chart of $SMH please go here.

SMH

Price closed at $25.67, down $1.26 on the week. SMH has now corrected 10% over the last 2 weeks. Price violated trend line support (now a dashed line) and closed between the neutral zone and the bottom Keltner Channel (50,4,25).

Momentum: The bearish divergence in late December/early January foretold the correction over the last 2 weeks. RSI dropped to 34, below the floor for up trends. As long as RSI operates below the bear divergence line, we usually expect either downtrend action (lower highs/lower lows) or consolidation. Note that the RSI is more oversold at $25.67 than it was at any prior price low on the chart, providing a glimmer of hope for a new positive reversal in the RSI and a new trend line on price.

Volume: Heavy short term distribution last week.

Volatility: ADX hovered at 21 last week while Std Deviation climbed to its 125-day average. No squeeze play is on.

Last Week's Outlook: We finally got a pull back. Pull backs can be excellent mid-trend entry points. The up trend still looks strong - there is nothing yet to indicate the up trend has changed into a downtrend. Watch to see how price interacts with its trend line as well as potential top-bottom support. In addition, watch how RSI interacts with the floor for up trends (i.e. 38), as well as if a long term positive reversal develops in the RSI.

Next Week's Outlook: Instead of mid-trend entry, the pull back wreaked technical damage, violating the neutral zone, trend line support, and the RSI floor for up trends. The picture is cloudy - wait for clarification.