SOX, SMH to Rally 50%? Chris Vermeulen Sees AI Stock “Feeding Frenzy” Ahead

that was Jennyacs, cohost of Next Gen investing here ontho broaden things outh. We have a big week ahead of us. So welcome in our next guest, Chris len, founder and Chief Executive Officer of theTt to have you with us today. Now you see the semicondu sector rallying 50%. And just talking to Jenny about Nvidia and AMD and some of the moves that we're seeing in these names today. What is the technical setup that m you bullish on these names going into year end, especially with some of the rotation an concern tied to these and the AI trade overall over the last several weeks. Yea Thanks for having me, Marlee. Yeah. When we look semiconductor space from a technical standpoint, which is following price action, momentum, sentiment, all of those things, the chart of, for example, Sox SOSX or SMH, the semiconductor sector ETF, those have very strong bullish chart patterns known as a bull flag pattern. And these point to dramatically higher prices. We could see som rally about 50% to the upside. There's a lotf things going to give it a good tailwind as we go into7. So first of all, the chart the long term trend and the short term trends a bullish pointing to higher pricing. But we do have midterm elections just around the corner. And if you go back historically, we have seen the S&P 500 rally about 14.1% within six months after we've hadrm elections. So we have this big tailwind to help semctors move higher. We also have just seasonality wise, we've got the Santa Claus rally, the end of year rally coming into favor. We saw we sur or survived, sorry,er, which is usually a very difficult month for equities. And so that is more or less behind us now. So we have that kind of end of year rally.hen we have anthropic potentially hg their IPO before the end of the year. And I think that is going to really get consumer sentiment or retail investors all excited about the markets.aa lot of people owning anthr They're probably going to do a similar as space. So anybody with a brokerage account can more or less get some shares. And it's going to create, I think, a feeding frenzy. It's going to renew get a bullish sentiment going again because there is no doubt the semiconductors that space is definitely taking a b seat. Since about June we've seen the Nasdaq is kind of trading back to where it was back in May. So we've seen that kind of frothy excitement in the space. Take a bit of a back seat. I think it's been long enough. I think we've got a lot of things coming into favor here that's going to push the markets higher. Semiconductors are going to drag the major indices higher as well. So if semiconductors break and run, we're probably going to see the o the end of the year as well. So there's a lot of things benefiting or pushing towards higher pricing ase head into 20 All right. I have a lot of follow ups in there. Let's first look at if we get break and run. Do you view it as being just the biggest names driving the rally, or is this going to be a broad rally? I th it will still be very tech heavy. I think the big names will do a lot of the heavy lifting. I feel as though we're could see a bit of a euphoric move, which means we could see a lot of people who aren't in the markets, a lot of people thinking a big corrections coming who are on the sidelines. I think if we start to see the markets break in, semiconductors hit some some new all time highs, I think we're going to see a feeding frenzy into the big names people will chase. We'll see micron and AMD and Nvidia all ofhose probably really pop and take off as the big brand names that everybody s. Soy focused. And that's where the stock market has been for quite a while. We have technology has done most of the heavy lifting over the last couple of years, really dragging the S&P 500 and the Nasdaq up. And that's where money naturally is going to go. I don't think it's going to be a full, broad market rally. I think people are going to just be very tech and AI driven, and it could be the last euphoric move. We could see a very strong push and pop. That happens quickly, but it might fizzle out sharply after that. And we just have to wait to see what the sentiment is like as this rally takes place. All right. You also mentioned seasonality potentially in its favor and some of these historical patterns with the midterms being one generally we see moves higher sixths post midterm elections. You also highlighted the Santa Claus rally. But you also said we bucked the usual historical trends in October. We did thee thing back in May. We bucked m of these historical trends this y How reliable are those patterns that previou held when we're not consistently holding t with the backdrop that we have right now? Yeah, that's that's a good question. I mean, seasonality is is interesting to follow, but you definitely do not want to bet in trade Obviously, we we broke the trend in May. For all we know, we have a terrible, very difficult end of year. We've seen it in the past, a huge sell off int the end of the year. And that brings up a good point. Marley is the stock market is having a very major cycle low right now. The last time we had a cycle low based on time cycles was if February 28th of 2025. That was right as the tariff, we saw the tariff crash, but it was also a cycle that b to the downside. So there was a cycle low, but that uptrend broke. And when a cycle breaks tu get a very sharp move. We saw the Nasdaq drop about 19% from th cycle low. The last time saw this was this year. It wasch, March 5th. We sawer cycle low. It broke and the s market fell about 8% very quickly. So we could if this cycle low fails and we break through this, we do have a lot of downside potential. The markets have been going sideways for several months. The longer something trades sideways, the m built up energy there is. So when it breaks to the upside or the downside. There is a lot of unwinding o positions because as something trades ss, people are building positions in there. And when when they go in a direction, half of those people are going to be on the wrong side. So wed to be very aware. And I think I think there's a lot of upside potential, but you also need to have a game plan if things break down, because protecting our capital is the most important thing. It's not always about chasing returns. So we need a plan. We need to know what to e if there is quite a bit ofown. S downside potential about about 20% on the Nasdaq. If this cycle breaks. If we don't get tractioncould be a very ugly end of the All right. So what levels specifically are you looking at as we are in this cycle low if we break that is going to tell you that we are looking at a convincing breakdown as oppos a temporary pullback. Yeah. I mean, when we look at the semiconductor SM for example, if we if we break more or less $5 share on SM, I thinkit coulde might start to see that head down to about $371 per share. So that's about a 31%nside in semiconductors. If they if they from here to the downside, the Nasdaq could drop down to about $591, like the Q Q Q, for example, down to about 591 per share. That's about a 17% drop. That's going to be the kind of critical support level measured move based on technical analysis and and order flow. So there's quite a bit of downsid potential. And that's why that's why I'm bringing it up is because you need to be aware of if it breaks, if the market breaks and rallies, I think you need to be long. If it breaks down, you better haven exit plan or be on the sidelines until there's a, you know, until the train leaves the station. Really, I always like to l it as the trains at a stati a country. You don't speak the language. can't read the signs. You don't know way it's going to go. You kind to wait for it to start to leave. you know, and then you hop on, y know, I don't like to pick bottoms or tops or a direction when it's directs. And that's one of the biggest things is wait for proof and then follow suit. It's n about picking tops and bottoms. Just make sure you're in line with the current trend. All right. So if if we are going to wait for the train to come to the station to see which direction we're going to go, Chris, then what is the single most important indicator or indicators that you are watching to tell us which direction it's going to go? Well, it will be price. I mean, as investors, we need price to move in our favor to make money. So price is the number one thing, which means we need price to firm up. We need to see volume moving in. We need to see more s a lot of money moving out of defensive sectors, maybe out of gold, out ofties, maybe consumer staples, healthcare and moving towards risk on. We want to see a wave of money in investor sentiment getting excited and moving back into that space. So price needs to start g higher and hold up for a certain period of time, maybe over a week or we and a half. And we need t money flowing into that space, not just drifting up on light volume, money actually flocking to the and the AI pocket. And youtioned gold there. So I want to talk about the metals trade as well. Here. You say you are seeing signs of a peak here. So what are you seeing in the tech for gold and even for silver as well. Yeah. I mean early this year we saw a euphoric kind of blow off top in precious metals. That was that was earlier this year. It was a signature move. Not only didrice action, it was a signature price move of, of, of price topping, but we also had sentiment at an extreme level. So that was a v very significant high. Really. Later thr we saw more or less in June we saw both gold and silver break down into a bear market phase, meaning they have been trending low enough, g lower for a long enough period of time. Theg averages are down. They both have a series of lower highs and lows, and more or less it is in a bear market phase and I we could see this last big move up in equities. If we get this rally, I think money might flow out of precious metals because they have been underperforming so dramatically. They're going to money is going to go from those metals and move into chase I think AI and try to generate some return. So downside targets for gold and silver are f low. They we've got about 3300 downside target based on what the cha are pointing to for gold. And then we have about $39 an ounce bit of downside potential.te a I do believe if we get dow to those levels, that is a major, major cycle low. That is a measured move based on the last major bulllags or bull markets that precious metals have been in for the last many, many years. And so that'll be a great opportunity. And so I think there's a lot of excitement in this space once we get down there, because gold works as an opportunity to grow e will be lots of upside, but precious metals and precious meta traders, we like those asat governments, lack of trust and things like that. So precious metals I r like, we just need to let the bear market continue to unwind. It will become a great opportunity. And as you men earlier, Marley, we do need to wait for price to start to turn back up, confirm that the train is higher, and then we can jump on that probably sometime early orr mid 2027. Now in there, you described the setup that generally makes gold appealing. Iit's it's the hedge against uncertainty. It's the hedge against geopolitical concerns concerns about government debt. We certainly that set up right now. So where's the disconnect, Chris, between the beaet that we've got gold in and the setup that's usually favorable to the metal? Well, I mean, a lot of times the fundamentals in the stories don't actually match the price action during major turning points. So the story is still str for precious metals. There's no doubt every it actually gets stronger for precious metals too higher. But it doesn't mean they're going to go higher. In 2011, when they both peaked, the story was strong. Everybo thought, this time is different in metals. We're going to keep going higher. Well silver went sideways for 14 years. Right. So just because the story and ts and what's going on feels like it should be going higher, doesn't mean it will. And that's that's what catches a lot of people off You keep holding it when the story is str And during a major topping phase and the beginning of a bull market phase, t story is still strong. And that people hold on to them, because they're worried, they're concerned. But overall, it really doesn't matter what the is. Price is the number one gauge of which direction it's going and what side of that trade you should be And so it really just comes down to we just have to give it time, let the selling eventually dissipate. Eventually it will fir up and it'll create a new opportunity. 2019 was when gold and silver started a new bull market, and we exited that position early this during that euphoric phase. And now waiting for the new bull market to give us a signal, probably in And even when if the economy does get weak and we see a bear market in equities, for some reason, precious m will be under pressure. Yes, they are seen as a defensive safe haven play, but they it doesn't mean they're going to go up when there is liquidation margin calls, unwinding of leverage. Pretty much everything kind o gets sucked down. And so we do have record amounts of margin and brokerage accounts. You see the margin levels skyrocketing. And the stock market is moving . So people are just borrowing money, pushing it into the stock market that needs to unwind. And when it does, i will bleed over into mostcommodn temporarily. Chris, r appreciate your breakdown this morning and a your technical analysis there.