Inside Markets — Overbought

Bullish overnight headlines fail to drive the SPX meaningfully higher due to overbought technical conditions and overhead resistance in the 3735-5810 range. Valuations are challenging at ~21x forward EPS estimates, which leaves the SPX more vulnerable to unexpected shocks.

The Philadelphia Semiconductor Index (SOX) has rebounded from its 9/6 low of 4528 and moved into its own resistance zone between 5240-5455. Failure to break above ~5455 with a subsequent pullback would form the right shoulder of a multi-quarter bearish distribution pattern. But strong secular demand trends and recent auto/industrial inventory cycle trough have us looking for a bullish technical outcome.