One chart analyst on record high watch has sharp eyes on this sector

CNBC

a day ago

One chart analyst who is on alert for a fresh record high in the S & P 500 is carefully watching the move in semiconductors. Tech stocks have rallied this week, after floundering for much of the year as lofty valuations and Trump's tariffs weighed on the group. The PHLX Semiconductor Index this week jumped more than 4%. Artificial intelligence darling Nvidia has advanced nearly 2% over the same period. A surge in names here could be the key for the S & P 500 to close the gap to its all-time high. Investors have been lasered in on the benchmark this week as the broad market index is less than 2% from the milestone. The S & P 500 reached 6,144.15 in February. It was last around 100 points away from that level. .SOX YTD mountain PHLX Semiconductor Index, year to date "The tech sector hasn't really done anything on a relative basis for the last year. Semiconductors, even Nvidia, haven't really done anything in relative terms. It's been this big, long consolidation, kind of sideways price action for the sector. Call it maybe a pause from a massive rally in the previous years," said Adam Turnquist, chief technical strategist at LPL Financial. "So, any type of breakout here to new highs in the tech sector, semiconductor leadership, we're watching for signs of that," Turnquist continued. "Because I think the read through is that we're going to get further upside in the market beyond record high territory." Here are the levels he is watching: PHLX Semiconductor Sector: 5,470. It closed Wednesday at 5,232.53 Nvidia: 153. It closed Wednesday at 142.83 A clearing of these levels would be a bullish signal for the broader market. Turnquist said that in prior 41-day rallies, which the S & P 500 notched on Friday, the forward 12-month return for the broader index was 13% on average, and more than 17% on a median basis. Of course, if the S & P 500 fails to reach new all-time highs, that would spur fears of a "double-top" in markets, he said. A double top, in which an asset has reached a high twice, is a bearish chart indicator signaling a potential reversal to the downside. Still, there has been a lot of optimism in the markets as of late, especially with some signs of progress on the trade front. Broadly speaking, investors expect the U.S. can avoid a recession, as long as tariffs do not return to the steep levels that were unveiled in early April. The rally in semiconductors can add to that confidence. Both were higher during Thursday trading, with Nvidia up about 1%. "If you start seeing Nvidia putting up new highs, semiconductors putting up new highs, tech sector putting up new highs, it's really hard to be bearish on the broader market in this rally," Turnquist said. "Obviously, it's not a bear market bounce. It's not a head fake. It's certainly real."