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Semiconductors' Market Leadership Reaches Important Trendline Support

ByChris Kimble
Published 09/28/2022, 10:44 AM
Updated 07/09/2023, 06:31 AM

Today we revisit an incredibly important stock market ratio: The VanEck Semiconductor ETF (NASDAQ:SMH) versus the SPDR S&P 500 (NYSE:SPY).

This ratio highlights how an important tech leadership group performs versus the broad market. And considering that tech stocks have led the market higher over the past 13 years, well, it’s important.

We’ve highlighted this ratio several times this year, following its breakdown through price support and its latest test of resistance (before falling again).

Below is a weekly chart highlighting a bearish head and shoulders pattern breakdown formed as a double top at the Dotcom highs. Yikes!

SMH/SPY Weekly Chart

The $SMH to $SPY ratio is testing its long-term trend line support at (1).

The chart has a heavy feel to it, so the bulls are going to need some super strength for the save. Their opportunity is now, and they must begin to see buying. 

Latest comments

It is too early to say. The problem for the semiconductor industry is a market issue and competition, the world largest semiconductor market reducing importing from outside and replaced product with domestic made products and also start to export to the international market and this trend will continue will not stop soon
When you're dealing with market balanced sector ETFs, competition isn't the issue.  Where one rises, the other falls, but it makes no difference if you're holding the sector itself.  The dings to the crypto sector have brought down the sexiness of the underlying stocks a bit, but the demand is still there from more mainstream manufacturing.  The real problems are the lingering supply chain issues that have curtailed chip-makers' ability to meet that demand. Regardless of getting murdered on this in the last year, I remain bullish.  The demand for semis is not going to ever go away, but only increase in importance into the future.
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