Gap Filled, Another Gap Opened
Strategic Outlook on SPX and Semiconductor Sector Performance
The stock market closed with an interesting reversal today. The SPX held its daily level of 7464 as support (modeled yesterday after the market closed), attempting to consolidate at 7,506 during the first hour of trading and filling the early gap. This established a clean, bullish move for the day without magnets below. In this case, the SPX is validating the bullish reversal candle studied last night, providing direction to the setup charted (which featured combined signals and for that reason we use levels). The fact that the central daily level held as support, while the price remains above the central weekly and monthly levels, indicates a bullish formation.
As noted over the weekend, we have been closely monitoring technology as our key mover, and today was no exception. The bullish move in the NDX and QQQ was driven by semiconductors and the magnificent seven. Specifically, META closed up 3.2% with a constructive move that filled the gap formed in the pre-market when it recovered the Central Weekly Level of 587.5 (the bullish above / bearish below level modeled since last Friday. AAPL is approaching our bullish weekly target with high volatility, having bounced 2.4% so far this week. Similarly, MSFT printed a bullish comeback after filling the morning’s gap. AMZN is also breaking out, moving constructively above its central weekly level while recovering the central monthly level with conviction. Overall, the Magnificent Seven appear constructive, suggesting that last week’s bullish move is likely to continue.
Semiconductor Sector: Caution Advised The semiconductor sector presents a different narrative and requires close attention. While the broader market remains constructive, the semiconductor sector is exhibiting some persistent weakness, with notable gaps below current prices that warrant caution.
SMH: The ETF faced rejection at its central weekly level of 611, and the 20-day moving average acted as a resistance line. With the price failing to maintain momentum, the chart below presents the technical conditions that suggest caution.
MU: Micron also faced rejection at its central weekly level of 1031.3. It failed to breach its 20-day and 5-week moving averages. While a bullish stochastic crossover is present, the lack of conviction in today’s price action (falling from the highs) is a significant watch out.
Subscribe and unlock the daily levels below for the SPX with this special zoom in to semiconductors including SMH, NVDA, AVGO, AMD, MU, TSM, QCOM, MRVL, and AMAT.
Is this Bearish?
Both the SPX and the NDX/QQQ are constructive, just be mindful of the most relevant condition in Semiconductors that suggest the choppy price action is far from over and major day to day swings could continue based on the following chart and levels for the semiconductor stocks: