Big Tech Rising Too Fast?

$VanEck Semiconductor ETF(SMH.US) 
$NVIDIA(NVDA.US)

Here we are almost at the top - SMH is whiskers away from the ATH and guess what? It was almost exactly a year ago and SMH pulled back in three waves from that high on 11th July 2024 until its low this year on 07th April 2025. Since then, the index has been on a tear and now is within touching distance of its ATH. The next question looms. Can it go the distance this time and break out to new highs? Let’s look at the details and my conclusion at the end of this article.

Take a look at the chart posted. It clearly shows a clean uptrend, higher highs and higher lows, shallow dips supported at the upper moving averages. But when you look closer, the RSI and the DPO are hinting at something else. Note the lower highs as the price makes higher highs. The RSI has made three lower peaks as SMH powers up and the DPO which irons out short term noise also concurs by trending lower ad price trends higher. That is a classical divergence to the trained eye. 
 

And volume? Its lethargic especially on the second wave up, not characteristic of accumulation and indicative of stealth distribution. What does Nvidia say being a big tech darling with the biggest market capitalisation and an AI mammoth?

The same divergence is seen. As price goes higher, RSI and DPO trends lower and volume Is similarly tepid on the price ascent. So as much as the market headlines want you to believe that AI is back and markets can only go one way and that is up, I believe caution is warranted especially with sentiments buoyant, retail piling in and FOMO rampant. 
 

Take a look at the broad market index hourly chart. Notice the divergences again. And if you may, take a look at your own charts. The broad market index and the Nasdaq has made new highs and that’s what the headlines keep saying. But the equal weighted SPX, Russell index which shows small caps and many other economically sensitive indexes are still way off their highs. More divergences it seems. Until these divergences iron themselves out, I believe caution is needed. It is time to be defensive. Better prices will be available around the corner to buy into great companies.

Disclaimer: Please kindly do your own due diligence as this is a sharing article and in no means financial advise.

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