The Philadelphia Semiconductor Index (SOX.X) 516.74 -3.34% has broken back below its 200-day moving average today and has the group looking somewhat defensive from the bar chartist perspective with near-term support coming in at the 50% retracement level near $496.
Semiconductor Index Chart - Daily Interval
The SOX.X reversed sharply higher near the 462 level back on May 7th, but today's break back below the 200-day looks defensive. Bulls will be assessing risk near-term to the 496 level and that will also serve as a bear's target. Bar chartists will be monitoring the starting to roll MACD. If bears can push the SOX.X back below the 496 level and get MACD to cross back below its rising signal line, then bears have a shot at the recent lows of 462. Key stocks to monitor in the group in my opinion are shares of Intel (NASDAQ:INTC) $29.08 -3.6% and Applied Materials (NASDAQ:AMAT) $26.19 -2.16%.
Point and figure chartists will remember past commentary regarding the SOX.X testing its bullish support trend at 460. At that time, we alerted bears not to be complacent in the sector as institutions are often lurking near the bullish support and bearish resistance trends. With that said, any break at the 440 level in the SOX.X would be further bearish as the point and figure chart ($20 box scale) currently has a bearish vertical count of 260 associated with its chart.
According to Dorsey/Wright and Associates, the semiconductor sector is currently in "bull alert" status at 52.3% bullish. It would take a reading of 56% to get the sector back to "bull confirmed" status, while a reading of 46% would have the sector turning back to "bear confirmed." In May, just before the reversal back higher, the Semiconductor bullish percent reached the 28% level, which was considered "oversold."
It has been my view that the semiconductor sector has been the strongest technology sector in the market and today's decline back below the 200-day moving average is going to weigh on a technology bull's mind and damage sentiment toward broader technology if not the semiconductors.