Posted On :

As I stare at the chart of the SMH (or SOX), I find myself once again scratching my head.  While the SPX is only a few percentage points away from completing its a-b-c reactionary rally, the semiconductor index has just completed its first 5-wave rally.  That's an actionary move (a new bull trend), not a reactionary (countertrend) one!  In short, the semis are offering a sneak peek into the near future.  I say 'near' because of the two plausible scenarios on hand, which I'll discuss in the upcoming video.  


Perhaps the a-b-c in the SPX isn't so.  After all, I've been ignoring the massive inverse Head-and-Shoulders base for days now, thinking it's what the market wants me to believe.  But the 5-wave rally in the SMH can only mean one thing: the next pullback will set the stage for another rally AT LEAST as powerful as the first.  Beyond that, two main scenarios would then present themselves, as I've already mentioned.

Back to the SPX's a-b-c, it's possible, if not likely, that the 'a' is actually the wave 1 of the fifth wave of the supercycle.  This would make the 'b' the wave 2, and the 'c' the start of the most potent wave of all: wave 3!  Why am I suddenly so excited despite the sad reality on the ground?  Remember how I characterized the interim pullback two Fridays ago ahead of this week's breathtaking rally: I specifically said more than once that since the indices and the VIX are falling together, the pullback is phony because this phenomenon only occurs during second waves.  Hence, what I've been interpreting as an a-b-c in recent days could very well be the start of a new bull market, i.e., the early stages of the supercycle's 5th and final wave.  While this all sounds almost unfathomable even to me, the new recovery highs could soon be reflecting not just the historically oversold conditions warranting a strong technical bounce, but also the crowd's breathing a sigh of relief; the worst-case scenario has been averted.  Of course, the trillions of dollars in stimulus can't hurt either.  At least not yet.

In short, something quite powerful is taking place under the surface that I believe could have very bullish implications going into the summer months, and likely into the presidential election in November.


The SMH rally's wave structure:


The SPX rally's wave structure:



Trade vigilantly,


Peter Ghostine (@peterghostine)

Subscribe to's TriModel Framework and stay one step ahead of the U.S. stock market with my daily insights and ongoing technical analysis.  Get real-time access to my high-probability trades.  All published content is disseminated in real time via the subscriber-only Twitter feed (@61point8) and via email (subject to Internet delays and mail server loads).

Live technical sessions are hosted regularly via GoToMeeting.  


Previous Article Morning Java (April 3, 2020)
Next Article Anatomy of a Day Trade
554 Rate this article:
No rating

Please login or register to post comments.