We talk a lot about the S&P and the Dow but it’s the Nasdaq that’s sexy. And what is our favorite leading indicator for this Tech-heavy index? Chips! $SMH is the Semiconductor Holders ETF and I feel like it leads the Nasdaq every time. Look at this chart of Semi’s vs the Nasdaq100. You can’t make this stuff up:
We want to take a look at pure price action for just the Chip Sector. There is major resistance at $37 going back to early 2007 so this is a key level. After testing it earlier this year and again throughout May it looks like the next test of these levels could be the one. That would be very bullish for the Nasdaq and higher beta names overall. We’ve seen higher lows since March, rising 50 & 200 day moving averages, RSI in bullish mode, and declining volume during the most recent consolidation. Check, check, check, and check.
A few of the Top Holdings we want to watch when looking at the Semiconductors are $TXN and $INTC representing 21.24% and 18.94% of the fund respectively.
The market is on fire this morning so keep an eye on these levels throughout the week. Also remember what we’re looking for in the S&P500. We discussed this on Friday and things have only improved since.