Semiconductors Measured Move Target of 6,500 In Play - Yet Still Bullish

It has been a long time since we have seen a day like on Thursday, but it does offer clarity after weeks of range-bound trading. In the end, it turned into a battle of the equal-weighted S&P and AI-centric Semiconductors in determining greater control of the market, and it looks like Semiconductors have won out, but the larger bullish trend is still intact.

Semiconductors are interesting because they have been steadily gaining until the latter part of 2025, when they blew upwards. We are now seeing mean reversion as the index makes a return towards its former set of trendlines. The interesting thing about Semiconductors is that, if you look at the projected measured move target down, it neatly intersects the first of the two bullish trendlines. What this means for individual AI stocks - government policy to Data Centers - remains to be seen, but in all likelihood we will have some consolidation, but can expect the trend to continue upwards similar to how tech markets recovered after the Y2K crash.

As expected for the Nasdaq ’bull trap’, it came all the way back to former range support. We are likely to see some follow-through lower as stops get whipped and a certain degree of panic kicks in, but don’t be surprised if we see some late-day buying tomorrow to see a return above 24,500. So, there is a risky day trade to play for that recovery - maybe buying after the first 30-min or hour after open, selling at the close??? What we have over the coming months is likely to be a sustained period below the 200-day MA. This will bring back the long-term buyer watch (the tables at the end of every blog post), where April 2025 was the last long-term ’buy’ signal.

The equal-weighted Nasdaq 100 (QQEW) has been to bears what the equal-weighted S&P 500 has been to bulls. We have a confirmed break from the range on confirmed distribution. Technicals are oversold, so we have a crash watch. The measured move target is $123.

The index that had been a tale of woe, but got off relatively lightly, was the Russell 2000 (IWM). It had been trending steadily downwards since August but had managed to stage a low-key recovery. Obviously, Thursday’s near 5% loss on confirmed distribution has put a pin in that, but we are not in crash territory as indicators were in recovery and are not oversold, as say they are in the Nasdaq (which is looking more vulnerable to a big swing lower). There will be likely be more pain to follow, but I suspect this will be the first index to recover.

The index bulls need to watch in the near term is the equal-weighted S&P (SPXEW). Had I posted yesterday, I would have talked about a new all-time breakout. Instead, I’m talking about a ’bull trap’, which means we are likely going back to the lows of the trading range, currently at 8,350. Beyond that we wait-and-see. We are not in crash territory; technicals remain net bullish and actually overbought, so we don’t have the conditions to drive a panic selloff.

This makes the situation in the S&P 500 interesting. It’s technically weaker and very close to oversold and therefore crash conditions, but it’s also range-bound despite losses. I don’t expect the 200-day MA to offer much support on the first pass, but if it can stick around it might be able to mount a bounce similar to what the Russell 2000 had mounted (until on Thursday).

Bitcoin has proved to be a frustrating asset since the September breakout failed to follow through in October. Yesterday had looked like it had recovered its mojo, only for Thursday to see it sent back from whence it came. It’s close to oversold - so vulnerable to a crash - but is also defending support, so it may be able to mount a challenge, perhaps after a test of the 200-day MA? My preference is for a bounce off the 200-day MA first; use GTC buy orders appropriately.

As of Thursday’s close, only Semiconductors are showing the actions of a crash. The equal-weighted Nasdaq 100 has seen a breakdown from its prior range, while the Nasdaq is sitting on the verge of a breakdown. However, other indices are range-bound and won’t necessarily deliver the losses seen in the Semiconductors. But markets do need a new long-term ’buy’ signal, and Thursday’s selling is a good start.