Semiconductors Making Big Breakout

Semiconductors ($DJUSSC) opened 2023 with a BANG! They spent the entire month of February and the first two weeks of March consolidating in a bullish ascending triangle pattern, but today we’re either going to get a confirmed breakout or a false breakout. It simply depends on where we close:

Notice that the daily RSI has remained almost exclusively in the bullish 40-70+ range since October. That’s a signal that semiconductors are trending higher. Clearly, the price chart is confirming it.

What’s important to understand about semiconductors moving higher, though, is that such relative strength typically accompanies a move higher in the S&P 500. Check out this chart and look at the positive correlation in the bottom panel:

I’ve highlighted the positive correlation region above 0.50 in blue and the negative (or inverse) correlation region below -0.50 in red. Check out how often these two areas are reached. There is VERY strong positive correlation between the relative strength in semiconductors and the direction of the S&P 500.

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Tom Bowley, Chief Market Strategist, EarningsBeats.com