Will Nvidia help pull up the SOX?
Main U.S. equity index futures slightly green
Mortgage market index 195.6 vs 192.4 last week
Euro STOXX 600 index up ~0.3%
Dollar, gold rise; crude up ~1%; bitcoin up >2%
U.S. 10-Year Treasury yield rises to ~4.44%
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WILL NVIDIA HELP PULL UP THE SOX?
All eyes will be on chipmaker Nvidia NVDA.O, which is due to report quarterly results after the bell on Wednesday. Expectations are high for Nvidia, which has driven the artificial intelligence-related rally in stocks.
With this, the Philadelphia semiconductor index .SOX appears to be at an important juncture.
Nvidia has been on a tear this year. The stock has risen 197%, making it the top performer in the Philadelphia semiconductor index .SOX, which has risen just 18% this year.
The broader basket of semiconductor stocks peaked in mid-July and has been droopy since. It ended Tuesday at 4,919.16, which puts it down about 17% from its record closing high.
Since the SOX topped, within the index, chip makers have been outperforming equipment-makers:
The SOX's chipmaker / equipment-maker ratio broke out of a base to the upside in mid-July. It then surged in mid-October after equipment-maker ASML Holdings ASML.O showed downbeat expectations for 2025 sales.
The ratio has pulled back, but ended Tuesday above its rising 50-day moving average.
Meanwhile, with NVDA's searing advance, the stock has been hitting all-time highs in relative strength vs the SOX.
Now, just ahead of NVDA's report, the SOX has been testing some significant chart support:
On Monday, the index hit a low of 4,806 where it flirted with its rising 55-week moving average, which now resides around 4,780. Since reclaiming this Fibonacci-based moving average on a weekly closing basis in January 2023, the SOX has not ended a week back below it.
Additionally, the support line from the October 2022 trough now resides around 4,750 on a weekly basis.
When the SOX tested these support levels in August and September it quickly reversed to the upside. Thus, traders will be keenly focused on the SOX's action coming out of NVDA's report.
An index close below 4,750 on Friday will suggest the SOX is spilling out of a two-year channel to the downside. It will also increase the potential that a head & shoulder's top is forming.
(Terence Gabriel)
*****
FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:
UK WATCH: HIGHER INFLATION DENTS BOE CUT HOPES - CLICK HERE
RISING BOND YIELDS NO PROBLEM FOR EQUITIES - UBS - CLICK HERE
TECH STOCKS LIFT STOXX AS REAL ESTATE DRAGS - CLICK HERE
BRITISH INFLATION SET TO DOMINATE BEFORE NVIDIA - CLICK HERE
FTSE FUTURES FALL BEHIND AFTER INFLATION RISES CLICK HERE
SOXchipmakersvsEquipmentmakers11202024 https://tmsnrt.rs/48Yq7PT
SOX11202024 https://tmsnrt.rs/3UYFwda
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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