The SOX has decided to go rogue in recent weeks, exploding on the upside while pretty much every other sector decides summers are meant for range contractions on light volume.
Yesterday we discussed the wasted firepower at work when the SOX spins its tires, without any of the major averages following on the upside. In an ideal leadership scenario, especially with such a powerful move by semiconductors, the troops following behind shouldn't be afraid to come out of their bunkers. Yet here we are with major averages remaining range bound.
The clock is ticking here as the SOX is coming up on a reinforced brick wall of resistance at 1640. For good measure there is another reinforced brick wall behind it at 1690. The chances of the SOX getting through this level without a substantial reset are as pretty close to zero as you can get in the markets.
The question every investor needs to asking at this moment is what happens to the rest of the market when the gallantry of the SOX subsides?
Sectors such as SaaS, Fangs and financials may not be enough to create the momentum needed to allow the S&P to clear the 3000 level in a convincing way, causing continued aimless meandering over the short to intermediate term.
Conservative optimism remains the proper course of action until further notice.
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