It's about 9 AM Chicago time as I'm writing this. The QQQQ opened higher this AM, but SMH was down on the open and some size was hitting bids in the semis. I know that there is a lead-lag relationship currently operative between "SOX and Stocks" so that alerted me to fade the opening strength rather than go with it. That trade idea paid out almost immediately in the first half hour.
Here's a further analysis: I looked back to March, 2003 and found 93 occasions in which the difference between SMH opened .5% or more weaker than QQQQ. From that open to the next day's close, the average price change in QQQQ was -.17% (38 up, 55 down), weaker than the average gain of .08% (380 up, 368 down) for the sample overall. Once again, we see SMH leading a relationship with a major stock average.
Applying these relationships to the proper time frames of trading is a big part of using them successfully. And, of course, one must keep in mind multiple lead-lag relationships, not just one involving a single trading instrument. When we see multiple leading relationships pointing the same way, that's when you can have real confidence in a trade idea.