SOX Semiconductors Weekly Chart

The red rising wedge, overbot conditions, negative divergence (red lines for indicators) and upper band violation all conspired to create the spank down in chips off the top three weeks ago. After the upper band violation, price needed to move to the middle band, which is also the 20-week MA, at 709, at a minimum, which it did. The lower band at 678 remains on the table. Note how price maintains the 20-week MA as solid support since late last year and when it failed in October the global central bankers immediately colluded to pump the stock market higher and save the day. SOX under 709 would indicate significant trouble ahead for the stock market.

Price failed the red rising wedge and has not back tested the lower trend line, at 735-ish, so this is on the table. As always, the collapses from rising wedge patterns can be quite dramatic, fast, and devastating so caution is required. The standard deviation lines are squeezing in tight, at the tightest since the September 2014 squeeze. Tight bands squeeze out a big price move but do not forecast the direction. Price has been far above the moving averages for the lat couple years and desperately needs a mean reversion far lower.

In the nearer tern, today, Keystone's proprietary trading algo, Keybot the Quant, is tracking SOX 714.90 as the key bull-bear line in the sand. The market bears need SOX under 714.90 to prove they got the beans to take the stock market lower. If the SOX remains above 714.90 this week, the market bears got nothing. Pay attention to the chips and especially the ongoing dance at the 20-week MA support at 709 and rising. 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.

Note Added 11 AM:  SOX launches to 725 testing its 20-day MA.