Look at this chart of SOX…<\/p>\n
![\"Chart\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202006\/20200620-jmu-01_wsx334.png\")
<\/div>\nIt’s rare for SOX to stray too far from its 50-day MA – the squiggly blue line on the chart. The red arrows point to the times over the past year and a half when SOX traded more than 7% above the line. Each time, the SOX dipped back down towards its 50-day MA over the next few weeks.<\/p>\n
Last week, the index traded 14% above its 50-day MA. And, despite a slight pullback, SOX closed Friday, still nearly 10% above the line. There’s plenty of room for it to fall from here.<\/p>\n
That’s bad news for the broad stock market. Because, when the semis get hit, just about everything else gets hit too.<\/p>\n
Here’s how the S&P 500 performed whenever the SOX pulled back over the past 16 months…<\/p>\n
![\"Chart\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202006\/20200620-jmu-02_wsx334.png\")
<\/div>\nThe S&P 500 pulled back hard along with the SOX during four of the past five semiconductor corrections. So, there’s a pretty good chance that the broad stock market will decline over the next week or two (or three) as the SOX drifts back down towards its 50-day moving average.<\/p>\n
Considering this, along with the numerous<\/a> other caution signs<\/a> we’ve pointed to<\/a> over the past couple of weeks, it seems to me that the odds that favor lower stock prices are headed our way.<\/p>\n Traders should remain cautious here. Folks who are looking to put money to work will likely have a better chance to do so in the weeks ahead.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n Have Jeff’s caution signs led you to profit in the past couple weeks? What do you see coming next for the market? <\/p>\n![\"\"](\"https:\/\/casey-assets.s3.amazonaws.com\/images\/misc\/jeff-clark-signature.png\")
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