Tech Bears Have Their Backs to the Wall

There is an underlying bullish bias that cannot be easily seen when merely analyzing market indices. The SMH and QQQQ both left bearish selling candles yesterday at their overhead resistance areas. This indicates that we may see indices retreat somewhat this week. However, drilling down deeper and looking at the underlying stocks themselves reveals an altogether different picture. After a dismal June, July the market rallied strongly off of support. At the beginning of this rally we found a number of stocks putting in double bottoms and we found other stocks trading in and/or breaking out of accumulation patterns. These same type of patterns have been showing up in our scans over the past couple of days. Today, after yesterday’s late day bearish market reversal, we find only bullish set ups in our scans. This is a strong divergence between the market indices themselves and we think it projects an underlying bullish current that is building in the market. We need the weekly signals, which we highlighted in yesterday’s report, to confirm before we can aggressively buy this market. At this time it looks hopeful. Note that chip stocks, despite yesterday’s late day SMH reversal, are doing rather well here. We uncovered several double bottom patterns in today’s scans that reveal and underlying current of continued recovery in this sector. ADSX and ATML are two good examples of what is taking place in this sector.