As you know, one of our most important market indicators is a simple view of the Semiconductor sector as a leader of the broader US stock market. SOX/NDX and SOX/SPX.
This morning the SOX index is breaking to and all-time high. If this is real and if its leadership continues to mean what it has mean to us in our market management over the last several years, the correction in the broader market will have ended… and my favored view of a deeper correction will be WRONG.
Here is the up to the moment view of QQQ/SPY and SMH/QQQ. While Tech leadership is still in question, Semi is leading not only Tech, but also busting to new highs relative to SPY/SPX (chart not included here). If things follow logically, we can probably expect QQQ/SPY to follow suit. “If” things progress as currently indicated. As you may know, Tech is currently experiencing another tremor within its Software sub-segment amid renewed AI disruption fears.
Bottom Line
The favored plan of a deeper market correction is on the verge of failure. The secondary plan of new highs coming sooner rather than later is teed up.
Sentiment did become very over-bearish (contrary bullish), just not to the epic degree of the 2025 correction. If Semi holds its breakout and its ratios to Tech and Broad continue upward, we’re likely ending the correction. Personally, this would have me reconsider and likely eliminate all hedging, given the bullish plan for 2026 in general.
