The Semiconductor Index Rally Continues as Planned

The Anticipated “up-down-up” Path Is Completing

In our previous update from June 13th, we found that for the Semiconductor Index (SOX) based on the Elliott Wave (EW) Principle, a local top was due at ideally ~$5420, followed by a minor 4^th wave correction (gray Wave iv?) to $5050+/-50 and a fifth wave (gray W-v) to $5745+/-100. See Figure 1A.

The index reached a high of $5311 on June 17, dropped to $5140 on June 23, and then rose to $5588 on June 27. Therefore, since our target zones were only off by up to 2%, the index followed the predicted “up->down->up” pattern, once again showing the strength of the EW. See Figure 1B.

Anticipate, Monitor, and Adjust If Necessary

We regularly review previous work to ensure we properly track the index and prevent it from drifting, which would require adjustments. Forecasting financial markets is similar to predicting the weather; both are stochastic and probabilistic systems. As a result, both need adjustments when input data changes. To assist with this, we have colored warning levels. If the index’s price stays above the orange level, there’s no real reason to suspect a top in this case.

The blue and gray levels alert our premium members to watch more closely, while a drop below the red level confirms that a (local) top has formed. These warning levels rise as the index increases, helping us stay on the right side of the trade as long as possible. For example, compare the colored warning levels in Figure 1A and Figure 1B.

In the short term, our preferred EW count suggests that the green W-3/c is likely to complete in the ideal $5,745+/100 target zone over the next few days. The market can then determine whether it will provide us with the green W-4, -5 sequence, or if the larger bounce we have expected since early April has already been finished. Thanks to EW, we will know soon enough, as breakdowns below key price levels, which we have access to, will indicate that the green W-5 will not occur.