The semiconductor sector leading indicator is flashing sell. As the stock market remains near all-time highs and Apple Inc (AAPL) reported a stellar quarter of record sales, the semi’s are dropping sharply. This is on the back of Xilinx Inc (XLNX) and Advanced Micro Devices (AMD) missed earnings. The semiconductor (SMH) is known as a leading indicator for the overall stock market. This was seen back as recently as October 2019 when the stock market started its incline higher to constant (almost daily) new all-time highs. The semiconductor index had already started to rally significantly by the time the stock market began to incline.
With that thought process in mind, the semi’s are extremely important to watch as a leading indicator for a stock market downturn or upturn. As mentioned above, the semiconductor sector leading indicator is flashing sell. The semi’s have begun to break lower and the stock market has likely put in a near-term top. Look for the SMH to continue lower from the current $143.00/share to $135.00 as first target, then $124 as second target.
Ultimately, as the semi’s continue to stay weak, investors and stock traders can short the S&P and the NASDAQ for the coming drop. The semiconductors are often a 2-4 week leading indicator.
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