Semiconductors are behaving more bullishly than the rest of the technology sector.
First, the Philadelphia Semiconductor Index made a higher high in mid-October. Meanwhile, the SPDR Technology ETF and Nasdaq-100 made lower highs.
Second, SOX pulled back to hold its 50-day simple moving average (SMA) while XLK and NDX sank all the way to their 100-day SMAs.
Additionally, SOX has been holding support at the same 2132 area where we flagged the in late September.
Chips also have sentiment in their favor as investors swing back toward cyclical stocks like industrials and financials (the “reopening”/”stimulus” trade). We already got a taste of that with yesterday’s strong ISM manufacturing index. (China’s Caixin showed a similarly powerful industrial rebound.)
This trend could drive capital back to semiconductors, which are more economically sensitive. The industry also has secular tailwinds like 5G rollouts and cloud computing.
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