Why did chips suffer a big correction?
Two things triggered this. First, KOSPI started selling off on June 19 on the threat of Korean national retirement fund rebalancing away from domestic stocks, which was then amplified by leveraged margin calls. Second, the 10Y yield added fuel to the fire by starting its rally on June 29 and continuing since then.
The falling KOSPI and rising 10Y yield pressured the broader market ($Invesco QQQ(QQQ)$ $SPDR S&P 500 ETF Trust(SPY)$ ), especially chips ($iShares Semiconductor ETF(SOXX)$ ) and memory ($Roundhill Memory ETF(DRAM)$ ). At the same time, money rotated into software ($iShares Expanded Tech-Software Sector ETF(IGV)$ ) as a safe haven since that sector was already beaten down heavily.
Starting in September, software is showing weakness while memory and chips are showing strength. They have been trading with a strong inverse correlation lately.
Since June 15:
- IGV: still up +15%, but down from +22%
- 10Y: 6.67% — the troublemaker
- QQQ: -0.33%, recovered from an -8% drop to now flat
- DRAM: recovered significantly from -32% to now -8.15%
- SOXL: recovered from -22% to now -12.81%
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