SMH Semiconductors ETF Daily Chart; Death Cross; Sideways Symmetrical Triangle Failure

The chips fall into a death cross on the SMH daily chart with the 50-day MA stabbing down through the 200-day MA (black circle). The SOX death cross is on tap for today or tomorrow. XSD will also likely follow in the days ahead. MU, AVGO, QRVO, NVDA and INTC are in death crosses. NVDA, AMD and QCOM are in a golden cross pattern with the 50 above the 200.

As Keystone always says, after a death cross occurs, the stock or index typically bounces and rallies. This behavior occurs due to the many days and weeks of softness needed to create the death cross; price is ready to bounce. Comically, this bounce usually occurs when every armchair technician is running around waving the death cross banner professing doom and gloom ahead. Investors will then diss the technical's saying the death cross did not create weakness instead a bounce occurs. Rookies. They simply do not understand the death cross.

The chips are trying to create that relief bounce after the sharp failure. Price fills the gap at 99-100. As long as the death cross remains in force, the SMH wil continue to weaken for the days and weeks ahead.

Price fails out of the sideways symmetrical triangle. Keystone had been highlighting that with the SOX this year as it formed and played out. The thick red line, the vertical side of the triangle, is about 13 handles so the downside target would be 105-13=92.

Note the false breakout higher in late August early September. This behavior is typical for sideways symmetrical triangles. About one-half to two-thirds of the way through the triangle price will breakout (or break-down) and traders will think that the path ahead has been chosen. But instead, price will sharply reverse, return inside the triangle and then move out the other side like the chart above shows. The false triangle breakout above resulted in price dropping back inside the triangle and then failure out the bottom. This behavior can occur the other way as well. If you would have saw a break-down in late August, you would have been suspicious that price would have reversed and moved higher for an upside breakout. But the bears won this triangle battle and the semi's are crushed.

Chips are in nearly every product manufactured nowadays so the retreat by semiconductors is a troubling sight for the global economy going forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.