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Semis Flash Red but Dow Signals Accumulation – Is a Broader Rally Still Intact?

By Declan FallonStock MarketsJan 28, 2025 02:36AM ET
www.investing.com/analysis/semis-flash-red-but-dow-signals-accumulation--is-a-broader-rally-still-intact-200656681
Semis Flash Red but Dow Signals Accumulation – Is a Broader Rally Still Intact?
By Declan Fallon   |  Jan 28, 2025 02:36AM ET
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Yesterday's market action turned ugly as tech declines stalled broader rallies but failed to derail them entirely. Surprisingly, the Dow Jones Industrial Average bucked the trend, defying expectations of a straightforward reversal off resistance.

Whether DeepSeek triggers a more significant decline remains uncertain—confirmation hinges on support levels breaking across the affected indexes.

The good news is that Dow Jones posted a solid day and is on its way to challenging 45.1K highs. Volume climbed to register as accumulation. Technicals are solidly net positive.

Dow Jones-Daily Chart
Dow Jones-Daily Chart

The Semiconductor Index headed sharply in the other direction. The warning signs of a reversal came last week on the inverse hammer at resistance, then Friday's losses (the whisper figure), before yesterday's slice through lead moving averages. Technicals are negative but not net bearish.

SOX-Daily Chart
SOX-Daily Chart

For the S&P 500 we have a new 'bull trap' on higher volume distribution. yesterday's selling coincided with a new 'sell' trigger in +DI/-DI. On 'bull traps' indexes typically retrace back to prior trading range support, which for the S&P is 5,775.

SPX-Daily Chart
SPX-Daily Chart

The Russell 2000 (IWM) didn't escape the selling, but it wasn't as badly hit as peer indexes. Volume registered as distribution but the index remained close enough to its 50-day MA to deliver a breakout in the coming days.

IWM-Daily Chart
IWM-Daily Chart

The Nasdaq reversed from converged trend and horizontal resistance, undercutting the 50-day MA in the process. Unlike other indexes, volume didn't climb to register as distribution. Technicals are mixed with new 'sell' triggers in On-Balance-Volume and +DI/-DI.

Nasdaq Composite-Daily Chart
Nasdaq Composite-Daily Chart

From an economic/business perspective, the vulnerabilities of the U.S. tech sector and energy sector to Chinese developments in the field of AI and sustainable energy is not one the current administration is equipped to address. Price leads economics, so the next few months will give us an idea as to where market confidence lies. Watch those support levels.

Semis Flash Red but Dow Signals Accumulation – Is a Broader Rally Still Intact?
 

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Semis Flash Red but Dow Signals Accumulation – Is a Broader Rally Still Intact?

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Comments (2)
Jack Bquick
Jack Bquick Jan 28, 2025 9:18AM ET
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I'm calling BS on DeepSeek.
jonathan seagull
jonathan seagull Jan 28, 2025 2:38AM ET
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So far, CCP won over DJT II
 
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