Big gap down this morning has pressed the Semiconductor HLDRs (SMH) below both its rising 200 DMA and its 15-month support line (36.40/30), which could trigger potentially significant technical damage to the intermediate-term chart structure, if the weakness sticks for the remainder of today's session. Having said that, however, my pattern and momentum work (hourly and daily) are encouraging me to remain short even if the SMH manages to grind its way up to 37.00/20 again, largely because my primary scenario has morphed into a bearish one. The September-October upside failures at 39.00/30 and the subsequent weakness into today's low near 36.00 represents the downside continuation of the July-August decline from 41.41 to 34.99. If my work proves accurate, then the SMH is heading for 34.00-33.00 before this decline ends.



Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his technical chart analysis and trading alerts on all major markets. For more of Mike Paulenoff, sign up for a free 15-Day trial to his MPTrader Diary by clicking here.