This Semiconductor ETF Might Signal a Chip Recovery

The VanEck Semiconductor ETF (SMH), or AKA Sister Semiconductor of Mish's Modern Economic Family, displays Leadership with our Triple Play indicator and strong momentum according to our Real Motion indicator.

Semiconductors are an essential part of our daily lives, a geopolitical football of national security interests, and chips are increasingly in demand.

Meet Sister Semiconductor (SMH), also known in trading circles as the VanEck Semiconductor ETF (SMH). SMH potentially indicates new leadership in the beaten-down tech industry.

Today, institutional investment managers released their 13 F filings and sometimes disclosures provide insights. Warren Buffett's Berkshire Hathaway (BRKB) disclosed today that it bought a $4 billion stake in Taiwanese chip giant TSMC (TSM). Why is this significant?

Stock market returns from October 04 to November 14.

Many semiconductor companies outsource the manufacturing of their components to TSMC. TSMC is also the No. 1 holding in the VanEck Semiconductor ETF (SMH) and a Taiwanese firm which brings additional geopolitical risk. SMH is breaking out of a consolidation pattern; it is about to regain the 200-day moving average and closed just below it.

SMH crossed the 50-day moving average at the beginning of the month, and we might see a significant shift in the chip market if SMH can cross the 200-day moving average and hold this higher price level.

Semis are in increasing demand, and in the past, Sister Semiconductor (SMH) was one indicator of technology rebounding.

The Real Motion Indicator and Triple Play Indicator on SMH show that the momentum, price, and volume trends indicate potential bullishness. The Triple Play indicator is a strong signal of market leadership, but SMH is also running rich on the Real Motion Indicator. This could lead to a breakout above the 200-day moving average, but this could also be a risky trade as SMH is subject to potential mean reversion.

So far, the bear market in semis has lasted longer than expected, so traders need to keep an eye on these indicators to position trades correctly. Keep an eye on SMH to have a better understanding of where technology and the semiconductor business are headed next.

Our MarketGauge Leadership Line, Real Motion Indicator, and Volume Trend Line Indicator can help identify stocks and ETFs with strong leadership trends. Our team is here to assist if you have any questions or need help implementing these tools in your trading strategy.

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Mish in the Media

Read Mish's latest article for CMC Markets, titled "What's Next For Key Sectors After the Midterms".

Mish explains why MarketGauge loves metals and is still patiently loading up equities on Business First AM.

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See Mish talk with Charles Payne on Making Money about the Oil markets testing the limits of Fed policy, China, and what to buy in the metals.

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See Mish join Neil Cavuto and Eddie Ghabour on Cavuto Coast to Coast to talk about the Fed's recent rate hike decision.

ETF Summary

S&P 500 (SPY): 396 support and 402 resistance. Russell 2000 (IWM): 185 support and 188 resistance. Dow (DIA): 333 support and 339 resistance. Nasdaq (QQQ): 286 support and 293 resistance. KRE (Regional Banks): 62 support and 67 resistance. SMH (Semiconductors): 221 support and 229 resistance. IYT (Transportation): 227 support and 233 resistance. IBB (Biotechnology): 133 support and 137 resistance. XRT (Retail): 64 support and 69 resistance.

Keith Schneider

MarketGauge.com

Chief Executive Officer

Wade Dawson

MarketGauge.com

Portfolio Manager