The market is being hit this morning with a one, two punch from bonds and semiconductors. The 20+ Year Treasury Bond Fund (TLT) gapped down below its 50-day simple moving average and the 7-10 Year Bond Fund (IEF) is hovering around recent lows.
In addition to pressure on bonds and raising interest rates we have some very poor action in semiconductors this morning. A weak report from Taiwan Semiconductors (TSM) combined with diminished expectations for Action Alerts PLUS holding Apple (AAPL) is hitting the Semiconductor ETF (SMH) hard.
Semiconductors have always been a cyclical sector but there has been hope that as new technologies evolve some of those ups and downs will become less intense. It is still premature to call a major top in chips but the action this morning shows that it is on the minds of a number of market players.
Technically this pullback in the S&P 500 is mild enough to be a positive rather than a negative. Stocks need some consolidation heading into earnings next week. Things can change fast as those reports hit. Apple is causing some pain for the Nasdaq brothers today but it has a tendency to find support rather quickly.
Despite the negative breadth I still see some action I Like in individual stocks like Baozun (BZUN) and PagSeguro (PAGS) . There are a number of biotechnology names that I am stalking as well. At the top of the list today is Vericel (VCEL) which has an attractive chart with a potential for a breakout over $12.75 or so.
It is sloppy and a bit ugly out there today but there are no signs yet of a major turn to the downside.