We currently have high inflation, a rising US dollar, and massive global interest rate hikes that have hammered stocks. Investors have lost approximately $24 trillion in value destruction for 2022 already.

The good news today is that it appears a short-term bottom has been reached, and a potential rally is beginning. The new month and quarter began with nearly an 800-point rally in the Dow.

We are focusing on semiconductors today, as a member of the modern family. Plus, semiconductors can be viewed as great indicators in a bear or bull market rally. That said, the semis (SMH) ETF has three interesting technical features that are a reliable way to assess what to do from here and how to know if this rally will last.

The SMH ETF has three interesting technical features that are a reliable way to assess what to do from here.

On Friday, the candlestick showed an inverted hammer Doji, a sign of a potential reversal of a trend. Today’s low volume and follow-through took SMH back to resistance. This is a good start; over 195 to regain technical strength would be better, with 210 a reasonable target. In Mish’s book, she talks about the confirmation of a phase change. With the price of SMH back above the 200-week moving average (WMA), the close below last week did not confirm a distribution phase, as we need 2 weeks to close below to confirm. Therefore, we need this week to close above the 200-WMA, and then a confirmation next week to return to a caution phase. Essentially, with some patience, no FOMO is necessary if the rally is good.

There’s good reason to believe that stocks will continue to face volatility as interest rates increase in the months ahead. At MarketGauge, we use our proprietary trading indicators and trading rules to keep us on the right side of the trend. Investors should keep an open mind about higher lows in semiconductors. But as always, trade wisely, watch the charts, and do your research before putting any money into the stock market.

You can sign up for a free consultation with Rob Quinn, our Chief Strategy Consultant, by clicking here. He’ll help you learn more about my top-rated risk management trading service.

Mish’s Upcoming Seminars

ChartCon 2022: October 7-8th, Seattle (FULLY VIRTUAL EVENT). Join me and 16 other elite market experts for live trading rooms, fireside chats, and panel discussions. Learn more here.

The Money Show: Join me and many wonderful speakers at the Money Show in Orlando, beginning October 30th running thru November 1st; spend Halloween with us!

Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth and a special bonus here.

Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish in the Media

Mish talks hedges and stock picks under the current environment in this appearance on BNN Bloomberg.

Mish says yes to Palantir, no to Bed, Bath and Beyond in this appearance on CNBC Asia.

Mish talks about a few of her picks, going short and why metals are in focus in this appearance on TD Ameritrade.

Mish talks putting your cash to work in this appearance on Business First AM.

Mish and Neil Cavuto discuss Central Bank credibility, US policy and more inflation to come on Fox Business’s Coast to Coast. Unless this is a spectacular bottom, preserving cash is smart.

Read Mish’s latest article for CMC Markets, titled “When to Put Cash Back to Work“.

Mish talks about key averages, yields and commodities on this appearance on Bloomberg TV.

ETF Summary

S&P 500 (SPY): 358 support, 369 resistance. Russell 2000 (IWM): 167 support, 171 resistance. Dow (DIA): 292 support, 297 resistance. Nasdaq (QQQ): 268 support, 277 resistance. KRE (Regional Banks): 57.90 support, 61.68 resistance. SMH (Semiconductors): 189 support, 194 resistance. IYT (Transportation): 198 support, 203 resistance. IBB (Biotechnology): 117.38 support, 120.41 resistance. XRT (Retail): 56.55 support, 58.71 resistance.

Mish Schneider

MarketGauge.com

Director of Trading Research and Education

Wade Dawson

MarketGauge.com

Portfolio Manager