🚨Opening Playbook is live at 10:30 a.m. ET🚨
Graham will break down the macro picture and key market levels so you can spot where the real opportunities lie this week [tap to join us for Opening Playbook]
There’s one chart I keep coming back to right now.
Not the S&P 500 Index (SPX). Not the Nasdaq Composite (COMP). Not even Tesla (TSLA) or Nvidia (NVDA) individually.
It’s the VanEck Semiconductor ETF (SMH).
And here’s why it matters more than anything else in your portfolio right now: This one sector could determine whether we rip to new highs or set up for a much uglier correction than the one we saw in July.
The Bull Case: Broad Strength and Massive Upside
Nearly everything is green. The S&P 500 (SPY), COMP, mega-cap stocks and the Invesco S&P 500 Equal Weight ETF (RSP) are advancing. Bitcoin, gold and even bonds are joining the move.
That broad participation is encouraging, but semiconductors remain the key.
SMH is currently 13% off its highs, leaving substantial room for the sector to lift the entire market.
The weekly setup is textbook: A pullback to about 50% of the run-up, a clean breakout, a clean bottom, full momentum and a solid close. This is about as good a weekly pullback continuation structure as you’ll see.
If SMH continues higher, the rest of the market will likely follow. That’s what I mean by a “risk-on” move. It doesn’t mean the market is shaky, bubbly or unhealthy.
It simply means there’s enough juice in growth-oriented assets to push the broader market higher.
The Bear Case — and Other Opportunities
But we’ve seen plenty of traps lately, including fake breakouts and breakdowns. If SMH turns out to be another bull trap, things could get messy.
The broad market is already near its highs. Other sectors have done the heavy lifting while semiconductors lagged. If SMH flushes lower, we could get a double whammy: The sectors supporting the market may fade just as technology weakens.
SPX could then take a harder hit than it did in July. Back then, other sectors could provide support. This time, they may be running out of gas.
Still, I’m leaning bullish. Historically, big Nasdaq runs followed by sharp flushes often lead to another aggressive move higher. The structure is clean and the momentum is there.
SMH isn’t the only opportunity worth monitoring. Gold through the SPDR Gold Shares ETF (GLD) and gold miners through the VanEck Gold Miners ETF (GDX) also deserve attention.
A decisive break followed by a strong run in either could create a very attractive setup, especially while participation remains broad.
But make no mistake — the market’s immediate bullish and bearish cases rest heavily on SMH. This is the chart to watch.
Now don’t forget to join us at 10:30 a.m. ET weekdays for Opening Playbook, and at 3:30 p.m. ET Closing Playbook!
Nate Tucci
Tucci Trades
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