Technical Analysis | Two Charts Show US Semiconductor Peaking
Continue to recommend investors to sell semiconductor stocks. In fact, the majority of the technology stocks they hold are the same.
Currently, the S&P Semiconductors Select Industry Index is bad news for the entire stock market.
This is because it has now broken below the upward trend of the October low.
The S&P Semiconductors is an equally weighted index. Unlike the broader market indices, it has only recovered half of the decline from the 2000 high.
Signaling a market decline
As this index is typically a leading indicator for the stock market, its failure to break resistance suggests that the broader market indices will retreat in the coming weeks.
Below is the weekly chart of the semiconductor index, note the bearish reversals (marked with red arrows) that occur at each top.
Each reversal occurs as the index tests and breaks below the 11-week moving average, the most recent one being in early August when the index attempted to rebound above this resistance but was suppressed.
The upward trend that started from the October low last year will be decisively broken.
Weakest sector: Semiconductors
The chart below illustrates the weakening relative strength of the semiconductor sector. The semiconductor index has formed a rounded top at the resistance level in 2023 relative to the S&P 500 index.
While many indices have surpassed the 2000 peak with healthy gains, semiconductor stocks have only recovered half of the decline from the 2000 peak.
It is recommended to continue selling semiconductor stocks, in fact, most of the technology stocks they hold as well.