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In our September 1st Breadth Note Short-Term Washout?, we noted that one-month moving average data presented a potential countertrend opportunity, which has played out across the major market indexes over the past week of trading. Additionally, we noted that ”…until short-term strength moves to the intermediate and longer-term metrics, stocks will likely continue to have a hard time maintaining upside traction.” For the leading market indicators that we track, early stabilization attempts have presented across a variety of leading indicators. While these developments have been a glimmer of hope for the bulls, they will want to see these key zones taken out to the upside to having confidence that major market trends are shifting from bearish to bullish.

below is a preview of the Intermarket analysis report from Research by Potomac. 

Semiconductors

The Philadelphia Semiconductor Index continues trading under the battleground zone at 2,800 and the flat 50-day moving average after slicing through this level late last month. Momentum has rebounded from the 35 zone after failing to become oversold, signaling that a potential lower high could be in the process of playing out. Note that the recent price action in July and August above the 2,800-level failed to produce an overbought reading in momentum and is a development that the bulls want to see to have confidence that the broad markets are finding some footing.

The Dow Jones Transportation Average has been making an attempt at a higher low over the past week of trading after slicing through the rising 50-day moving average and trading below long-term resistance at the 14,600 zone. Momentum continues to print values below the 55 zone, the upper bound of a bearish regime. Here, the bulls want to see the 50-day moving average and the 14,600-zone recaptured to the upside.

After cratering to the downside through long-term support at the $4.10 zone, Copper appears to be making an attempt at a lower high after recapturing the declining 50-day moving average to the upside. While this is an early encouraging development for the bulls, note that the previous attempt to rally above the indicator in August was subsequently met with another bout of selling pressure. Momentum sits at the 50 zone and below 60 – the upper bound of a bullish regime. While these early positive developments have been a glimmer of hope, bulls will want to see the $4.10 zone recaptured to the upside along with a bullish momentum regime to have confidence that the trend has shifted from bearish to bullish.

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