The PHLX Semiconductor Sector Index has closed lower for seven consecutive trading sessions. However, Wall Street technical analysts point out that the Nasdaq 100 Index’s intraday rebound from its lows on Thursday (the 15th) may be the most encouraging signal seen since the U.S. stock market began its pullback in October.
According to a report by MarketWatch, Dan Kirsch, a technical analyst at Jefferies, noted that the Nasdaq 100 Index (NDX) staged a major turnaround on Thursday, marking its strongest intraday rebound since April—a development he described as “perhaps the most encouraging sign since the market correction began in October.” He interprets the recent stumble in U.S. stocks as an attractive buying opportunity, suggesting that positions established now could benefit from a potential rally in November and December.
Kirsch is highly regarded in the market, with his daily technical analysis attracting a large readership. In a report released Friday, he noted that while he had anticipated increased market volatility this month, the extent of the weakness in technology stocks came as a surprise. Most encouraging, he added, is the improvement in market “breadth,” with the rally showing a broader distribution than he had expected.
He pointed out that a new trend has emerged: technology stocks are diverging from other sectors. While the Nasdaq 100 Index has retreated about 5% from its recent peak, the S&P 500 Equal Weight Index has rebounded 7% to 8% from its lows. Kirsch views this as an encouraging sign for the broader U.S. market—though he noted that it would be even better if technology stocks were to join in the strength.
Jonathan Krinsky, a technical analyst at BTIG, also believes that U.S. technology stocks are poised for a rebound. He noted that following a seven-day losing streak for the semiconductor index, “a technical bounce in semiconductor stocks is finally set up,” though he cautioned that his overall outlook for the broader market remains unchanged, with the potential for further declines ahead. Kolinsky noted that there are only two historical precedents for such a prolonged losing streak in the PHLX Semiconductor Sector Index (SOX)—occurring in 2002 and 2008. In both instances, the index staged a strong rebound, only to subsequently fall even further, plunging 33% and 38%, respectively.
He believes this time will be no different: semiconductor stocks may see a sharp short-term rally, followed by an even deeper decline.
Kirsch stated that it is premature to declare an end to this correction phase. His technical analysis suggests that the S&P 500 still has room to test its 100-day moving average (located around the 7,600-point level). Echoing Kolinsky’s concerns regarding the outlook for the PHLX Semiconductor Sector Index, he emphasized that the 11,000-point mark serves as the next key support level.