Inside Markets — SOX Remains Vulnerable

The Philadelphia Semiconductor Index (SOX) broke key technical support at ~5100 on Monday and remains vulnerable to further downside below that level.  The SOX could recapture 5100 in the days ahead, but we see much greater likelihood for the group to experience a period of relative underperformance like it did over the summer.

The strong buy-the-dip impulse in AI themes can be attributed in part to ‘January Effect’ inflows.  In our opinion, these AI themes would not have bounced as fast or far if the DeepSeek news hit in any other month. Positive fund flows (401k and 529 assets) and corporate buyback demand will remain as bullish tailwinds for now but will begin to fade by mid-February.  The corporate buyback window reopened on Monday with ~28% of the SPX eligible to repurchase stock. On next Monday, the window will open to 45% of the SPX and hit a peak of 60% by the end of the week (2/7).