MarketMoodz
Stockton Flags Big Pullback in Semis; SMH Signals Downside Risk
Katie Stockton warns semiconductors are vulnerable to a period of downside leadership in the short term and potentially the long term, with Tom DeMark’s TD Combo signaling a nine-month correction for SMH. The chart setup suggests broader risk for tech and the market as semis have been a relative strength engine this year.
Key Takeaways
- SMH outperformed the S&P 500 by roughly 7 percentage points in Q1.
- Katie Stockton warns of near-term and potentially longer-term downside leadership for semiconductors.
- Tom DeMark’s TD Combo model indicates a nine-month corrective phase for SMH.
- TSM accounts for about 12% of SMH and has broken below the daily cloud, signaling a bearish shift.
- SMH–SPX ratio shows deteriorating intermediate-term momentum; weekly MACD on the ratio turned down.
People Involved
- Katie Stockton Co-founder, Fairlead Strategies
- Tom DeMark Creator of the TD Combo model
Entities Involved
- VanEck Semiconductor ETF (SMH) Semiconductors-focused ETF
- S&P 500 Index (SPX) Benchmark index referenced in the analysis
- Taiwan Semiconductor Manufacturing Co. (TSM) Major SMH holding and chipmaker
MarketMoodz Analysis
For investors with heavy semis exposure, a pullback could drag the tech sector and broader indices. The combination of a TD Combo-based nine-month correction signal and deteriorating MACD readings points to a more prolonged period of leadership downside for semiconductors.
Historically, the TD Combo signals have foreshadowed cyclical corrections, with prior sell signals aligning with late-2021 and mid-2024 pulls. That pattern underscores how semiconductors can act as a leading indicator for tech and growth equities, even when other areas show resilience.
What to watch next: keep an eye on SMH near 293, the 38.2% Fibonacci retracement, and the rising 200-day moving average for near-term support, with a secondary level below 232. Also monitor TSM’s relative performance to the SPX, as weakness there could amplify downside leadership in the sector.
Source: Original Article
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