Semiconductors Crack - Magnificent 7 and Software Oversold
Hawkish Fed, mid-term seasonality, next week's high probability setups for the SPX and mega-caps.
The macroeconomic environment for the SPX has undergone a severe hawkish turn, fundamentally altering the trajectory of the broader market. The confluence of reaccelerating inflation, driven by geopolitical energy shocks and rising service sector costs, has forced the Federal Reserve to completely abandon any prospect of rate cuts for 2026. Instead, the market must now digest the reality of an active monetary tightening cycle.
The broader market remains entrenched in a rotational phase. The technology sector is facing mounting pressure. We are observing a sequence of weakness that originated in software, transitioned into the Magnificent Seven, and is now sending its first warning ripples through the semiconductor space.
Is this surprising? No. Technical analysis interprets price action, and price action is the ultimate driver of sentiment. IGV and MSFT topped in October when annual levels like $116 and $516 were reached, colliding with the upper band as MACD crosses were printed. PLTR topped in November following a weekly MACD cross and a breach of the upper band. Price action provides the signals, and the narrative follows, not the other way around. That is exactly why my focus remains strictly on price action and technical analysis. For the Magnificent Seven, early in May I anticipated a bullish visit to $317 for AAPL. The stock reached overbought conditions right at that exact level when June started 🎯. GOOG breached its upper weekly bands, and I anticipated a multi-week decline, which is currently unfolding 🎯 consistently below the central monthly level I anticipate for every month. NVDA also breached its upper band, while MSFT found rejection at its 40WMA after completing a bull flag move I also anticipated early in May targeting $459 🎯.
I navigate momentum and call reversals when technicals flag them, always providing clear price levels to validate each thesis, that’s how performance is enhanced.
Semiconductors: Last Wednesday, I highlighted the elevated risk of chasing the rally when MU posted its earnings results. I presented the specific implications regarding gaps and price formations. The exact levels the SPX, QQQ, and SMH needed to conquer to validate the rally were explicitly posted, and those specific levels acted as precise resistance.
Regarding MU and AMD, I posted fundamental analyses last month documenting their underlying strength, meaning their rallies are well supported. However, their overbought conditions are currently comparable to NVDA, and GOOG in previous months and a consolidation is likely, just be mindful that following such rally consolidations can bring -5% moves in a single day and double digit moves for a couple of weeks (as anticipated for NVDA and GOOG). Therefore, the odds of semiconductors entering a topping/consolidation process are extremely high, as I warned last week.
Other euphorias worth remembering from 2025 and 2026 are: NFLX, META, MSFT, PLTR, GLD, SLV… technicals always pass their bill; anyway my pullback benchmarks for Semis are NVDA and GOOG.
Seasonality adds further pressure to this context. Midterm years are volatile, also the end of June is a particularly bearish season. Theoretically, tech bounces in July, and today we will study the specific technical conditions for each major stock. Some are likely to continue selling off, while others are approaching critical support zones.
The price action in the S&P 500 throughout the week was particularly weak for tech. This was not surprising for subscribers who read my high probability setups last Saturday, which anticipated a bearish move for SMH 🎯 and AMD 🎯 right at the peak of the euphoria. MSFT 🎯 continued falling as the technicals suggested, Gold (GLD 🎯) also expanded its selloff mode, and SPX 🎯 fell despite the Thursday rally.
Among my high probability setups, there were clear reversal signals for financials and oil. This past week simply augmented those reversal conditions, as we will study for JPM and the Dow Jones below.
Subscribe to get the complete technical setups for next week. My analysis is strictly neutral and focused on price action. That is why calling a bullish reversal on March 28 was spot on, just like my target for a bearish reversal in the SPX at 7638, where I notified subscribers that same week that 7620 was enough to consider the bearish reversal zone officially reached. Numbers (price levels I provide) and written analyses always tell the truth, and they are fully verifiable.
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Today’s Agenda
Market Context: Charts+levels for SPX, Indices, ETFs, VIX, Breadth, and Crypto.
Deep Dive: Individual analysis with charts and targets for Mag Seven and setups.
The Heat Rank: Analyzing the stage of every security in a single view.
Setups Blueprint: Entry levels for short and long setups with price targets and invalidation levels for all the securities in the watchlist prioritizing stronger setups.
Let’s begin.