Equity markets are likely completing a short-term low after peaking, right on track, during the week of the last FOMC meeting mid-September and that month’s option expiration. I have to admit the downside move this week was more than I expected, but the timing of the low looks right, just as equity indices and bellwether industry groups bottom at support.

Rather than simply highlight a chart of the S&P 500 index, I’d like ensure that readers, particularly those with a bearish outlook, keep an eye on the technical behavior of one of the more important industry groups, semiconductors. Why? Well, if the economy is deteriorating so badly, why are the semis within 3% of their all-time highs. More importantly, why is the relative performance versus the S&P 500 index for this economically sensitive group within 0.35%, yes 0 .35%, of all-time highs?

At first glance, the chart below may look complicated, but let’s break it down to explain the method behind the visual madness. Combining momentum indicators with price and relative performance is a very powerful combination to triangulate a technical view of a security.

The top panel is a simple momentum indicator, tracking the short-term ebb and flow of the SMH Semiconductor ETF. When the indicator moves back to t...

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