Strategy

What Are The Semiconductors Really Telling Us

Semiconductor giant Broadcom Inc. (AVGO) is the largest component of the iShares PHLX Semiconductor ETF (SOXX). This makes the stock a key benchmark, so as Broadcom goes, SOXX goes. However, the other top holdings include:

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Broadcom announced earnings on Thursday after the market closed and surged on Friday, closing up 8.2% at $290.29 after the company delivered impressive earnings results.  The closing price also marked a new 52-week highs.

PHLX Semiconductor ETF (SOXX) is up 18% year to date. 

The SOXX trending higher is a good thing for the economy and a great indicator of economic strength because everything uses chips, from smartphones to home appliances, to automobiles. But is SOXX setting up for a great short?

The Global Purchasing Managers’ Index (GPMI) is an indicator of economic health for manufacturing and service sectors in the globe. The global manufacturing sector continued to register a subdued performance at the close of 2018. Output growth remained weak, while rates of expansion in new orders and employment both slowed. And the non-manufacturing and manufacturing sector are making lower highs and lower lows.

Source

So, is SOXX setting up for a great short?

It’s very possible based on what the GPMI is showing us. A short confirmation will be when price stops making new higher highs within the weekly supply zone and price starts breaking higher lows on the daily chart.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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