The chips are cooked both negatively diverged across all chart indicators on the daily and weekly charts. The top is in and a multi-week slide lower in the semiconductors is set to begin as price receives the neggie d spankdown.
Despite the SOX price at record levels the chart is a turd. Many of you should know how to identify this stuff yourselves by now. The red rising wedge pattern is bearish. Stochastics are overbot agreeable to a pullback. The red lines clearly display the negative divergence so price needs to be slapped lower on both the daily and weekly basis.
The upper standard deviation band is violated so the middle band, which is also the 20-wk MA, at 4780, is in play. The ADX shows that the rally last summer was a strong trend higher (pink box) but that strong trend petered out. Then, over the last 4 months, the ADX indicates a strong trend higher for the rally but it is petering out and about to disappear. Also note that as price printed the higher high, the ADX prints a lower low (neggie d; more bearishness).
The Aroon is classic. This behavior is rare but it is showing-up on a few charts due to the rampant stock market euphoria. The Aroon green line at 100% indicates that every bull on Wall Street expects chips to go to the moon. NVIDIA has created an orgy of joy and everybody wants a piece of the action. The Aroon red line is at 0% indicating that not one bear expects the chips to drop. In other words, 100% of bulls and bears expect the chips to continue higher forever. The Aroon is a contrarian indicator.
SOX price is overextended to the upside above the moving average ribbon so a mean reversion lower is needed. Keystone is not in any chip plays right now long or short. The only thing that can save the semiconductors and delay the top for a few days is a happy Jobs Report in the morning. Otherwise, the SOX is cooked. Expect it to begin falling in earnest into a multi-week decline. You can also watch XSD and SMH to see how this drama plays out going forward. Sell, Mortimer, Sell. It is closing time for the semiconductors. Semisonic's Dan Wilson performing Closing Time. 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 Sunday, 6/9/24: SOX continues the orgy highs but the weekly chart remains neggie d. Ditto the daily chart. The 2-hour chart stumbles sideways waiting for more AI and NVIDIA hype to have an excuse to move higher. The negative divergence on the daily and weekly SOX charts says the top is at hand on the daily and weekly bases. The monthly chart is in neggie d except for the MACD line so the expectation is for SOX to top out now and begin a multi-week drop, say, the rest of this month into July, then price will rally again and come back up to the current highs likely placing a long-term important top in the late July, August, September, time period. The charts will tell you exactly when as they play out going forward.
Note Added Thursday, 6/13/24, at 6:33 PM EST: The SOX was part of the orgy parade this week and AVGO spiked the punchbowl further today. The happy news on earnings sends chip stocks higher and of course, more AI hype. Let's take a look. Nothing much has changed. The daily SOX chart likely needs a down-up-down-up jog move to turn all the chart indicators neggie d so that would be a top on the daily basis next week. The happy talk this week simply right-translates the top a week or two. The charts will reset and call the top.
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