Semiconductors have been a key pillar of the S&P 500’s advance since 2016, and now they may be flashing a warning signal for the overall market.
This chart of the Philadelphia Semiconductor Index shows how gains have been slowing all year. Prices have squeezed into an increasingly narrow range, with the 50-day simple moving average (SMA) recently dipping within about 1 percent of the 100-day SMA.
Also notice the action as SOX tried to climb above 3300. After some initial closes at new highs, the candlesticks turned solid as early rallies got sold.
Next, looking at the weekly chart, MACD has steadily waned since February (bearish divergence). There was also a bearish outside week July 12-16, which SOX has yet to return above:
Finally, the chart below shows the ratio of SOX vs the SPDR Technology ETF (XLK). Notice how it’s been slipping since April – despite what should be a lot of good news involving strong demand for chips. This may suggest that, should another summer pullback occur, SOX may be especially vulnerable.
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This chart of the Philadelphia Semiconductor Index shows how gains have been slowing all year. Prices have squeezed into an increasingly narrow range, with the 50-day simple moving average (SMA) recently dipping within about 1 percent of the 100-day SMA.
Also notice the action as SOX tried to climb above 3300. After some initial closes at new highs, the candlesticks turned solid as early rallies got sold.
Next, looking at the weekly chart, MACD has steadily waned since February (bearish divergence). There was also a bearish outside week July 12-16, which SOX has yet to return above:
Finally, the chart below shows the ratio of SOX vs the SPDR Technology ETF (XLK). Notice how it’s been slipping since April – despite what should be a lot of good news involving strong demand for chips. This may suggest that, should another summer pullback occur, SOX may be especially vulnerable.
TradeStation is a pioneer in the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
