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There’s a conversation I’ve been having internally about the market lately, and it keeps coming back to the same thing: Semiconductors.
Not because they’re screaming upside right now — they’re not. And not because they’ve already rolled over like the rest of tech — they haven’t.
But they’re the last piece standing, and if they go, this whole thing changes. Let me explain what I mean…
The Last Bastion of Strength
For a while now, the Semiconductor Sector (SOXX) has been trying to be the last bastion of risk-on upside. While the rest of tech — the mega caps and everything else — has flipped to the downside, semiconductors have held their ground and haven’t cracked the same way.
But it’s starting to build some bearish structure, and that matters because the broader market is already showing signs of stress. Mega caps have been soft, breadth has thinned out, and the S&P 500 (SPY) is drifting toward the 200-day moving average.
If we could settle there and hold for a bit, there would at least be a case for a controlled correction, but that scenario depends heavily on whether semiconductors can stay resilient long enough to let the rest of the market find support.
In my view, the semiconductor sector is probably the most important domino in determining what kind of pullback we’re really looking at.
Right now, the base case is something measured — steadily grinding down with some back and forth, down to the 200-day, maybe a little lower — and that’s manageable and tradable.
But if chips go, that’s where the pullback can get really ugly.
The Risk If This Domino Falls
If semiconductors break down — and I mean really flush — it’s a different story entirely, because at that point no one’s even a believer in the upside of the AI chip world anymore. If that narrative cracks, the selling pressure could accelerate fast.
The market has been extremely headline-driven, and there’s still plenty of room for downside because of the vacuum created by the relentless climb from last spring to the recent highs.
When you get a stretch like that, sentiment can shift quickly once momentum fades, and that shift tends to hit the most crowded trades first.
Right now, chips are still one of those areas investors are clinging to. I’m hoping Micron Technology (MU) and others aren’t a catalyst for a flush, but earnings can be unpredictable, and if they spark a breakdown, it could move faster than most people expect.
So I’m watching this sector closely — not just as a trade, but as a tell for the broader market.
If chips hold up and eventually stabilize, a slower grind lower still fits the picture, but if they roll over hard, we could be looking at something far more aggressive — and the shift could happen in a hurry.
This is one of those moments where the market is giving you a clear signal about what matters most, and right now that signal is pointing directly at semiconductors.
Now don’t forget to join us at 10 a.m. ET weekdays for Opening Playbook, and at 3:30 p.m. ET Closing Playbook!
Nate Tucci
Tucci Trades
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. Why I’m skipping Nvidia, Amazon and Tesla
This might sound counterintuitive…
But if I were starting from scratch today with just $10,000 to invest…
I probably wouldn’t buy Tesla for robotics
I wouldn’t choose Amazon for e-commerce
I definitely wouldn’t make Nvidia (NVDA) my main AI bet
Not because those companies are bad. In fact, they’re incredible businesses.
But if you’re starting with a smaller account, the goal usually isn’t stability — it’s growth.
With only $10K to work with, I’d be looking for companies that have a real shot at doubling, maybe even more, over the next 12 months.
And while the robotics, e-commerce and AI sectors are exactly where I’d focus, the names I’d target would be very different from the obvious giants everyone already knows.
Of course, nothing in the market comes with guarantees.
But if I were building a portfolio from the ground up today, the stocks on my list would look nothing like the mainstream picks you hear about on TV.
In fact, I recently revealed this “Buy This … Sell That” watchlist live, including the names and the research behind them.
If you missed the session, the good news is you can still access it completely free today…
