A June 9 Elliott Wave Principle (EWP) update on the semiconductor index (SOX) said red Wave-iii had finished after passing the 161.80% level at $13,336 by 662p; it then pointed to a red W-iv pause around $10,185, derived from $9,523 plus 662p, within a broader $10,390–11,490 zone. It added that a red W-v move remained outstanding, targeting $15,000 +/- $1,000. Since then, SOX bottomed at $11,794 on June 9 before peaking at $14,655 on June 22, keeping the framework, which also uses forward returns alongside EWP, aligned with subsequent price action.
The correction reached the indicated levels but was deemed too short to qualify as an intermediate-degree red W-iv, prompting a one-degree wave relabel: the June 22 peak is now red W-iii and red W-iv is described as in progress, with an intended $10,870–$11,765 objective. From that high, the move lower is counted as five waves for grey wave-a/i, while a three-leg rebound (orange W-a, b, c) is under way with a common c=a reference at a $14,472 gap; from there, the next leg is projected towards roughly $12,000–12,900, depending on whether W-c/iii equals 1.618x W-a/i or matches it. A failure to reach $14,472 before breaking the current low would imply grey W-b/ii ended early, and prior targeting is described as having hit 6 out of 8 zones, with the grey W-c/iii zone still expected after the grey W-b/ii zone was met.
Semiconductor Index Outlook and Trading Opportunities
We believe the semiconductor index (SOX) peaked on June 22 and is now in a corrective phase, presenting specific opportunities for traders. This view is supported by recent data, including a major memory chip maker’s softer-than-expected Q3 2026 guidance issued last week. This pattern is a normal pullback within a larger uptrend, similar to what we observed during the 2021 cycle before the next major advance.
For the immediate future, we anticipate a short-term bounce toward the $14,472 level to fill a recent price gap. This temporary strength makes it unwise to build aggressive short positions right now. Implied volatility on SOX options has already risen 15% off its June lows, indicating that the market is beginning to anticipate this upcoming downturn.
Strategy and Tactical Positioning
Our strategy is to watch for this rally to lose momentum near that $14,472 target zone. A reversal in that area would be the trigger to initiate bearish positions, like buying puts with August 2026 expiration dates. This aligns with the latest Philadelphia Fed Manufacturing Index, which pointed to a slowdown in new technology orders.
Once the bounce fails, we expect the next leg down to target the $12,000 to $12,900 zone. Our confidence is high, as this Elliott Wave Principle approach has correctly identified 6 of the last 8 key turning points in this index. Derivative positions should be structured to profit from this anticipated decline into late July or August.
