Semiconductors continue struggling while other sectors bounce
An interesting divergence is playing out in the market. While the $Dow Jones(.DJI)$ is currently in the green for the week +1%, the $NASDAQ 100(NDX)$ and $S&P 500(.SPX)$ are down -3% and -0.9%, respectively. A major sector rotation is underway:
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Semiconductors ( $VanEck Semiconductor ETF(SMH)$ ): Down -7.4% on the week, driven by sharp pullbacks in individual names like $Micron Technology(MU)$ (-9.5%), $Advanced Micro Devices(AMD)$ (-7.5%), and $NVIDIA(NVDA)$ (-5%).
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Defensives & Value: Consumer Staples $Consumer Staples Select Sector SPDR Fund(XLP)$ has jumped +3.9% so far this week, Healthcare $Health Care Select Sector SPDR Fund(XLV)$ is up +3.7%, Materials $Materials Select Sector SPDR Fund(XLB)$ gained +2.3%, and Financials/Real Estate ( $Financial Select Sector SPDR Fund(XLF)$ and $Real Estate Select Sector SPDR Fund(XLRE)$ ) are both up +1%.
This is the daily moves breakdown per individual names in the SP500:
Price action closed with bearish conviction yesterday in technology names, affecting both the SPX and NDX. Today's session opened with a major gap down that, given oversold conditions, triggered a bounce that successfully filled the gap across the major indices.
The central question today is: Is this a failed breakdown marking the ultimate bottom, or just a technical bounce before the decline resumes?
During the past several days, I have warned about the imminent risk in the SPX and NDX, both of which carried very high probabilities of visiting 7,684 (765 for the SPY) and 29,647 for the NDX (720.9 for $Invesco QQQ(QQQ)$ ). Both milestones were achieved today, proving the bearish structure thesis right and validating that patience is key.
My bearish positioning for the indices and semiconductors was validated, as the declines for NVDA and AMD were anticipated last Saturday and both reached extended levels of 213 and 537, respectively. At the same time, bullish targets in $Costco(COST)$ and $Wal-Mart(WMT)$ were also anticipated with specific levels that today flipped from resistance to support. Furthermore, in last night’s mid-week update, I highlighted the bullish thesis for $Netflix(NFLX)$ with clear parameters, and the stock rallied +2.9% today.
Markets are always moving - and sometimes, the best move is knowing what works for you.
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