The week ahead: Transports and semis

The broad outlook: Semiconductor stocks held the market back last week, but the Dow, the Diamonds and the transports are all going up. It may be a slow grind, but I think we’ll see 1 percent on the broad market by week’s end. Longer term, that growth will continue but it will be a choppy way up until we see the iShares Russell 2000 (IWM) break out of the consolidation it is in, at which point the market can really get moving.

What I’m looking for: I’m seeing continued rotation out of the semiconductor stocks and into the transports. I already had alerts out for the railroads, but they should continue the uptrend this week.

One stock I will be watching is United Parcel Service (UPS), which is showing some strength, having crossed its 200-day moving average. If it can get into the gap that is sitting on the chart at about $111, that will get me going.

What I’m avoiding: Semis are a sector in which people are hoping for a comeback, especially after the June 9 selloff. From a technical standpoint, that selloff created a hungry bullish engulfing candle; we have to get at least halfway up through the body of that candle – and we’re a ways off – before I’ll be back into SMH (Van Eck Vectors Semiconductor).

While I’m totally out of semis, I’m expecting to see more weakness; if they fall below the 50-day moving average, money will fall out of them fast. I won’t get back into SMH until it tests the 50 and bounces up or recaptures the 20-day moving average.




Petra Hess runs She is a technical swing trader and long-term investor in domestic and Canadian stocks. She only trades stocks, not options. At the time this article was published on, she had no share, or open orders in SMH; she held shares of CNR.TO, KSU and LSTR in the transport sector.

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