BTIG: Adding to Semiconductor Shorts Carries Elevated Risk at This Point
Alina Collins
The Philadelphia Semiconductor Index has fallen roughly 26% from its June high. BTIG strategist Jonathan Krinsky warns that pressing short bets on semis now is tactically risky — and the real position to trim is the equal-weight S&P 500, which has quietly stretched to extremes.
Semis are down 26% — why not keep pressing the short?
The SOX has dropped about 26% from its June 22 all-time high, retracing exactly 50% of the rally that began March 30.
Krinsky still sees downside risk toward the 200-day moving average, but the market is entering peak earnings season with an FOMC decision due tomorrow.
This means → the directional call may be right, but the timing window is wrong. Clustered catalysts raise the odds of a short-squeeze snap-back, worsening the risk-reward of adding shorts here.
So what should traders actually be trimming?
While semis and AI names pulled back, the equal-weight S&P 500 (RSP) staged an independent rally — and has now hit the upper rail of its trend channel.
RSP's 40-day rate of change versus QQQ is near +15%, the highest in over twenty years.
In plain terms = the gap between broad-market stocks and tech has stretched to a historical extreme. Krinsky expects it to close via RSP falling to meet QQQ, not QQQ rallying to catch up.
What does the low-vol vs. high-beta divergence signal?
The spread between low-volatility assets (steady, defensive names) and high-beta assets (more volatile, aggressive names) has reached an extreme.
Krinsky notes that historically, this kind of divergence has preceded sharper index-level drawdowns.
This means → the index surface looks calm, but internal dispersion and hidden volatility are building pressure. This divergence is unlikely to resolve quietly — the more probable outcome is a sharp, index-level selloff.
Can traders still chase Apple and defensive sectors higher?
Apple has traded inside a rising trend channel since 2020 and has once again touched the upper rail. Krinsky sees the next meaningful move as a pullback, not a breakout.
Healthcare (XLV) and REITs (VNQ) show solid trends, but he advises against chasing them higher at this point.
This reflects a broader call: with most sectors sitting at technical resistance, the risk of chasing in any direction is elevated — whether that means shorting semis or going long defensives, now is not the time to add.
Content is for reference only, not financial advice.