SOX Provides Bright Spot

On Tuesday the low put/call ratio and the reaction to the Fed suggested a pullback was likely to occur soon. Wednesday the volume pattern made the same suggestion. Thursday the market dropped hard. The S&P and Dow both lost almost 2%. The Nasdaq just under 1%. There’s no telling whether this drop will continue over the next few days, but for the bulls there is a silver lining in today’s action: Semiconductors.

Today the semiconductor index (SOX) bucked the trend and rose over 1.5%. When semiconductors take on a leadership role, it’s normally a good thing for the market. I decided to look at times following other days where the SOX managed to rise over 1.5% while the Nasdaq dropped .75%:

Not only are the % wins and average trade columns notable here but the massive volatility as well. Look at the size of the average wins and losses when you go out 4-6 weeks. Even over the next two weeks they’re huge. If you’re bullish, the stats are compelling. If your unsure, then a volatility play might be something to consider.