This past week had all the potential to see a revival of the great bull market of 2023. The September inflation data, Apple’s latest product announcements, and Arm’s IPO all seemed had the possibility to reignite the fire of bullishness for investors. By Friday’s close, however, the S&P 500 appeared to be limping into the weekend. Growth stocks struggled and defensive sectors thrived as the market took on a very risk-off feel to wrap the week. Now, as the market focuses on Fed policy implcations through year-end 2023, the S&P 500 chart appears to be forming a potential head and shoulders pattern. Note the peak in late July around 4600, surrounded by lower highs in June and August. If and when the SPX would break below the “neckline” formed by the interim lows in June and August, this would suggest further deterioration to at least the 200-day moving average. Let’s look at three key ETFs, all showing signs of distribution, all with further downside potential, and all with implications for further deterioration in risk assets. Semiconductors (SMH) Semiconductor stocks have done quite well since the October 2022 low, with the strong relative strength demonstrating consistent outperformance over the S&P 500 index. This ETF beautifully illustrates the dominance of large cap growth stocks over other cap tiers in 2023. In July, we noted a bearish momentum divergence, where price moved higher while the RSI trended lower. This pattern often indicates an exhaustion point during bull phases, and suggests limited upside due to weakened positive momentum. After testing resistance around $160 twice in July, the SMH (NASDAQ: SMH) registered a lower high in late August. If the price would push below $142, that would mean a new lower low as well. Given the weakened relative strength profile and negative momentum swing, there appears to be very real potential for further downside in this bellwether industry group. Homebuilders (ITB) For most of 2023, homebuilders were firing ...Full story available on Benzinga.com