Semiconductor Sector Enters 'Danger Zone' as Technical Warnings Mount

Jeff deGraaf, chairman and head of technical research at Renaissance Macro, has issued a warning regarding the current trajectory of the semiconductor sector. According to deGraaf, the historic rally seen in chip stocks has reached a critical juncture, entering what he describes as a 'danger zone.' The analysis focuses on the PHLX Semiconductor Index and the VanEck Semiconductor ETF (SMH), both of which have seen significant gains during the current cycle. The warning comes as technical indicators suggest the momentum that drove the sector higher may be waning, potentially signaling a trend reversal. DeGraaf suggests that the current technical setup warrants a strategic shift in investor behavior. Rather than continuing to accumulate positions, the research indicates that shifting toward a selling posture may be prudent to mitigate risk as the rally loses steam. As semiconductors represent a massive portion of current equity market capitalization—driven largely by the expansion of artificial intelligence—a correction in this sector could have broader implications for the S&P 500 and Nasdaq 100. Traders are now closely monitoring the PHLX index for confirmation of a market top.