Fighting on the Frontier

While a fiery debate rages on about whether China's DeepSeek AI firm legitimately renders the epic rally in America's AI plays a bubble ripe to pop, or not, we are more focused on the technical developments reflected in the charts. 

And when we see the updated charts for NVDA and many semiconductors it is clear that we buyers and sellers are now fighting on the frontier after a prolonged periods of bears fighting to little avail in bulls' territory.

On the updated weekly SOX (Index for semiconductors) chart, below, as noted with Members over the weekend and on this website in my Friday afternoon video we would gauge whether last week's candlestick amounted a head-fake attempted breakout (top arrow). 

Note the long, skinny shadow on last week's candle (on a weekly chart each candle represents one week of trading), indicating a massive price fade off the highs and closing near the lows of the week. 

That fade has clearly followed-through lower with one of the bigger semi selloffs we have seen in years, perhaps since the 2020 COVID crash, as NVDA is off by 17% as I write this. Furthermore, price is undercutting the support trend I have drawn since at least last summer. 

True, we have the FOMC and a plethora of earnings (including some chips) this week, which means a squeeze back higher cannot be ruled out. In, fact, judging sentiment, bulls are expecting just that as a repeat of every dip we have seen for two years. 

But with NVDA finally below its 200-day moving average after not testing it in just over two years I still defer to the view that parabolic moves do not historically simply have garden-variety pullbacks when they are finally ready to correct. The risk remains another volatility event like we saw shades of last summer, albeit one which has more staying power as levered longs in equities and levered shorts in volatility get caught in a broad market degrossing into one of the most seasonally bearish setups one can find.