Semiconductor Stocks Shaken Not Stirred! Is the AI Rally Over?

The Name's Semiconductor Downturn Semiconductor

Well well well what do we have here? It appears our high flying semiconductor stocks the darlings of the AI driven market rally of '23 and '24 have hit a bit of turbulence. Or perhaps as Goldfinger might say they've been 'shocked… positively shocked!' After boasting returns that would make even Q blush with envy (98% in '23 and 75% in '24 respectively) they've decided to take a rather unscheduled holiday. Down over 17% year to date making them the third worst performing sector in the S&P 500. A martini is definitely in order.

License to Sell? Not Quite Yet

The VanEck Semiconductor ETF (SMH) our little SPECTRE of the market shows a clear loss of momentum. Its 200 day moving average once a comforting support is now more like a scornful Elektra King – cold and resistant. The weekly MACD indicator has turned negative a shift so dramatic it's practically a Blofeldian plot twist. The cloud model support once as reliable as my Walther PPK has been breached. The cyclical uptrend is no more leaving us facing a prolonged correction. 'Do you expect me to talk?' Not necessarily but expect a few raised eyebrows in the City.

A Glimmer of Hope or GoldenEye Deception?

Don't count them out just yet. Like a Bond villain with a penchant for comebacks semiconductor stocks are reacting to oversold conditions. A potential 'buy' signal on the daily MACD suggests a relief rally might be on the cards. The 200 day moving average now resistance near $242 will be the key to watch. It's like defusing a bomb – one wrong move and… well you know. This could be a better selling opportunity in the coming weeks. Time to sharpen those trading skills gentlemen (and ladies).

The World Is Not Enough... Upside Momentum

The ratio of SMH to the SPX shows a clear loss of long term upside momentum completing a topping pattern like SMH in price terms. Semiconductor stocks were a source of upside leadership from 2023 through mid 2024 and they have since become a source of downside leadership. We find that when semiconductors lose relative strength it is a sign of a more difficult market environment more broadly like 2022. It appears that the markets have had enough.

A Quantum of Solace for Traders?

So what does this all mean? Well when semiconductors lose relative strength it's like losing your Aston Martin – a sign of a more challenging road ahead. Think back to 2022. Not a pretty picture. For weekly updates on SMH and dozens of ETFs you know who to contact after all the markets never sleep. One must always know what card the enemy holds!

CNBC Pro LIVE: For Your Eyes Only

Ah CNBC Pro LIVE at the New York Stock Exchange. For those of you feeling a bit shaken (not stirred!) this exclusive event on June 12th might be just the ticket. Expert insights interactive clinics and a cocktail hour on the legendary trading floor. Limited tickets of course. Because as Auric Goldfinger would say 'Once is happenstance. Twice is coincidence. Three times is enemy action.' And we wouldn't want enemy action on your portfolio would we?