Stock Market Shake-Up

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BraVoCycles Newsletter
January 28, 2025

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  • Today’s theme is semiconductors.

  • Yesterday was a bloodbath in the semiconductors sector, with SOX and NVDA down 1.9% and 15.7%, respectively.

  • Presumably, the news about China’s DeepSeek low-cost open AI model caused a re-appraisal of the AI sector. 

  • DeekSeek apparently got access to 50k H100 Nvidia GPUs. How is that bearish for NVDA? Unless investors look beyond DeepSeek and expect China to manufacture chipper AI chips that are comparable in performance to the Nvidia chips.

Semiconductors (SOX) Then

  • Since June ’24, we have posted several warnings about the potential top and underperformance of the Semiconductor Index (SOX) relative to SPX and NDX.

  • Our anticipation in the June 7 newsletter (see below) was “clairvoyant” – SOX did make an overthrow of the trendline and quickly reversed, as we will see later below.

  • Read the June 7th blog on SOX here- Semiconductor Index (SOX) Update- Boosted by NVDA?

Semiconductors (SOX) Now

  • SOX topped in July, as expected. Fast-forward 6 months, SOX is 18.5% below July’s high, while SPX is 6% above its July high.

  • The bounce from 5 Aug looks corrective. SOX has not been able to gather strength for a new high.

  • The huge “gap & crap” yesterday led SOX below the 10W EMA, 50W MA, and the grey trendline support. Those are not bullish signs.

  • The next support is the red wedge's downtrend line and the 100W MA. The long-term downtrend will be confirmed below these and preferably below the 200W MA.

Sentiment & Technical Analysis

  • Back to “Fear.”

  • While the PUT/CALL Ratio is in the greed territory and reversed yesterday from a relatively low value.

  • Consider following me on X (former Twitter) in addition to the newsletter, as I often post valuable information there in real time between the newsletters.

    • I posted this striking chart depicting the relative stock market capitalization of the semiconductors sector – In the past, I posted SOX/DJI and SMH/SPY, …, which conveyed the same message.

    • If the history is any guidance, SOX should correct significantly and drag along NDX and SPX.

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