Tuesday, February 16, 2010

SMH Deconstruction Update

Almost 2 years ago I deconstructed the SMH and, based on its current dynamics and top ranking in the Rotation model, this seemed like a good time to take another look. SMH components and proportions haven't changed significantly . . INTC and TXN are still the 800 pound gorillas in this ETF and while the top 10 holdings comprise 87% of the assets, the top 2 comprise 42.5%, and the top 3 components comprise 55.5%. This rather unique situation cries out for a 3 finger lead and reverse analysis and I'll be exploring those setups in the coming weeks. SMH represents a somewhat different case than the Qs, which is comprised of 100 stocks, with the top 10 representing 47% of the assets and the top 3 representing 26%.
In the meantime, SMH continues to display unusual staying power in the face of deteriorating technicals among other sectors. INTC has been the springboard for the latest surge although TXN and AMAT look poised in join in as INTC's upward momentum now appears ready to fade. Pair traders might consider short INTC, long TXN for the next couple weeks and I'll run the ETF Rewind pairs analysis and Project Z forecast later this week to check the possibilities and probabilities.

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