SOX Semiconductors Daily Chart; Overbot; Rising Wedge; Negative Divergence Spankdown; Upper Band Violation; Chips Trying to Recover from 6-Month Cyclical Bear Market

SOX prints the top that Keystone called on 3/21/19 on this daily basis. The chips receive the neggie d spankdown (red lines). The overbot conditions and rising wedge pattern also create the bearishness. After the upper band is violated, the semiconductors retreat to the middle band.

The chips are a key component of the broad stock market and an important economic barometer. A chip goes into about every product made nowadays. The SOX bounces on Friday out of that green falling wedge, which is a bullish pattern. The stochastics remain weak and bleak and dip into bear territory below 50% hinting at more weakness ahead in this daily time frame.

The 150-day MA at 1278 is lining-out sideways testing the cyclical bear market that the chips have been mired in for the last 6 months. Note that the 150 is sneaking higher by a couple ticks of positive slope and is technically coming out of the cyclical bear into a cyclical bull. However, the big drop in Q4 will be factoring into the calculations for the 150-day MA which may keep the slope of the moving average line flat or negative. By definition, price would need to drop below 1278 to sustain a long-term bear market in the chips. Watch the 150 closely going forward. For now, the bulls are at the start of a cyclical bull market after a 6-month cyclical bear.

The Keybot the Quant algorithm, Keystone's proprietary trading robot, continually tracks the semiconductors due to their important imapct on stock market direction. Keybot identifes SOX 1340 (yellow bar) as the bull-bear line in the sand. Price retreated to 1365 last week but recovered and finished at 1396. If SOX remains above 1340, bulls will throw confetti as the stock market floats higher. If SOX drops below 1340 and trends sideways to sideways lower from there, the wheels will fall off the stock market for many months, even perhaps for a year or two.

The SOX weekly chart shows a long and strong MACD line so a jog move is likely as the chips top out, down one week, and then up again for another matching or higher high. At that time, the MACD should roll over with neggie d and the SOX should begin a multi-week descent. Keystone is not playing the chips right now but watches with interest. Chips may be setting up for a nice short in a week or two (as soon as the MACD goes neggie d on the weekly chart).

Looking at USD (do not confuse this with the US Dollar Index), the 2x semi long ETF, the chart is identical to SOX as would be expected. SSG is the 2x semi short ETF so this may be a potential long play, say, in a week or so. SSG is setting up with positive divergence as would be expected since USD and SOX are in negative divergence (mirror images). Both USD and SSG are thinly traded. 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 1:00 PM EST on Monday, 4/1/19: The SOX gaps higher up 31 big points, +2.2%, to 1426. Remember, the chips have some upside juice still available in the weekly time frame, so a potential multi-week top may occur for the semi's sometime this month.