As a leading group for the broad market, it was bullish to see the Semiconductor ETF (SMH) make a new 52-week closing high yesterday. And with Texas Instruments (TXN) which was expected to open higher by more than 5% this morning following strong earnings after the close yesterday, SMH is looking to trade up another 1%  today. 

While the gold miner ETFs (GDXJ and GDX) are up the most of any group over the last week, the Semiconductor ETF (SMH) is right on their heels with a 5-day gain of 5.38%. As shown in the snapshot of group ETFs below, SMH is also trading in extreme overbought territory and is 11.94% above its 50-day moving average. Given that today’s trading will leave SMH even more extended, we would be careful entering any new longs in the space until some downside mean reversion occurs.

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There has definitely been quite a bit of group divergence over the last couple of weeks. As shown below, the homebuilder ETF (XHB) has gotten hit hard over the last week with a decline of 3.13% even though it’s still above its 50-DMA. Media (PBS) and Building and Construction (PKB) ETFs have also fallen more than 2%.

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As mentioned earlier, the Semiconductor ETF (SMH) has gotten extended into extreme overbought territory. Below is a look at how extended the individual stocks are that make up the semiconductor group. As shown, all but three stocks in the group are trading overbought, while 14 are in extreme territory (>2 standard deviations above their 50-DMAs). KLA-Tencor (KLAC) and Lam Research (LRCX) are the most overbought at three standard deviations above their 50-DMAs.The least extended semiconductor stock right now is QUALCOMM (QCOM), but even it is still trading 1% above its 50-day.  

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