The semiconductor index (SOX) rose 50% and posted 18 consecutive up days. On Friday 24 April, RSI5 was 98.7 and RSI14 was 85.1, on a 0–100 scale.
RSI5 was the highest on record for the index. RSI14 has been higher only twice, in 1995 and 2011.
Historical Extreme RSI Context
To compare with past extremes, similar cases were defined as RSI5 above 95.0 and RSI14 above 83.5. Since 1994, this occurred three times, and a further three times only one of the two thresholds was met.
Across all six cases, the average immediate move was -7%, with a range of -5% to -11%. The average intermediate forward return was 15% (5% to 67%), with 1998 the only negative case.
At 12 months, the average return was 8%, ranging from -40% to +80%, with 1998 again the outlier. Excluding 1998, average intermediate and 12-month returns were +25% (5% to 67%) and -26% (-39% to -2%).
An Elliott Wave count placed a pullback zone at 9,700 ± 200, followed by a move to 13,000+. It also described a later cycle that ends the rise from the April 2025 low and then leads into a new bear market.
Near Term Positioning Framework
We see the recent 50% surge in the semiconductor index (SOX) as a signal of extreme strength, but also exhaustion. This historic 18-day winning streak has pushed the 5-day RSI to an all-time high of 98.7. Even with strong Q1 2026 earnings reports last week from key industry players, the index has struggled to push much higher, suggesting the rally is overextended.
Looking at the six times since 1994 when we saw similar extreme readings, an average drop of 7% followed in the immediate short term. This pattern of a sharp but brief pullback has been remarkably consistent across decades of market activity. The historical range for this decline is between 5% and 11%, providing a clear map for near-term expectations.
Our wave analysis supports this, suggesting we have just finished a major upward impulse and are now entering a corrective pullback, labeled as green Wave-4. This aligns perfectly with the historical data pointing to a short-term drop. We project this correction will find a bottom in the $9700 +/- 200 range.
Therefore, for the coming weeks, derivative traders should position for a decline from the current index level of around $10,450. The latest Core PCE inflation report for March 2026, which came in hotter than expected at 3.1%, provides a fundamental headwind that could trigger this technically-indicated sell-off. Strategies like buying puts or establishing put debit spreads could be used to capitalize on this expected move while defining risk.
However, we see this expected dip as a temporary reset before the next major advance toward the $13,000+ level. Historical data, excluding the 1998 anomaly, shows that after the initial pullback, the index rallied an average of 25% in the intermediate term. This suggests that the end of the corrective Wave-4 will present a significant buying opportunity for call options or bullish spreads.
Beyond that intermediate rally, the data points to significant risk developing about one year from now. Once the final upward wave completes, historical precedents warn of a sharp decline, with an average loss of 26% over the following 12 months. This corresponds to our forecast for the start of a new, significant bear market.
