Critical 4 Hours Ahead, Korea And Iran Drive Selling In US Markets

Important Data Ahead Please click here for an enlarged chart of Direxion Daily Semiconductor Bull 3X ETF (NYSE: SOXL ).

Note the following: Semiconductors are the leading sector that has been driving the stock market higher.

SOXL is the momo crowd’s favorite semiconductor ETF.

The chart shows that on Friday, SOXL managed to rally and close at the top band of zone 2 (support).

The chart shows that in the early trade today, SOXL has fallen back into the middle of zone 2.

The move was driven by price action in the South Korean stock market.

As we have been sharing with you, lately the South Korean stock market has been leading the U.S. stock market.

This is a reversal from the historical pattern of the South Korean stock market following the U.S. stock market.

The reason for the South Korean stock market leading is that two of the largest memory manufacturers SK Hynix Inc – ADR (NASDAQ: SKHY ) and Samsung Electronics Co Ltd (OTCPK: SSNLF) are in South Korea.

Overnight, the South Korean Kospi Index fell 9%.

SK Hynix fell more than 15%.

This is the largest one day loss since SK Hynix listed on the South Korean exchange in 1996.

Samsung fell more than 10%.

In our analysis, the trigger for selling in the South Korean market is that investors were buying ahead of SK Hynix listing in the U.S.

SKHY started trading in the U.S. on Friday.

The selloff is the classic sell the news reaction.

In the early trade, the carry over from South Korea is hitting stocks of Micron Technology Inc (NASDAQ: MU ), SanDisk Corp (NASDAQ: SNDK ), Western Digital Corp (NASDAQ: WDC ), Seagate Technology Holdings PLC (NASDAQ: STX ), and Roundhill Memory ETF (BATS: DRAM ) especially hard.

On the positive side, Taiwan Semiconductor Mfg.

Co.

Ltd. (NYSE: TSM ) reported June revenue rose 68% year-over-year.

However, revenue rose only 6.2% sequentially.

TSM is important because TSM manufactures advanced chips for the likes of NVIDIA Corp (NASDAQ: NVDA ), Apple Inc (NASDAQ: AAPL ), and Advanced Micro Devices, Inc. (NASDAQ: AMD ).

Over the weekend, the U.S. hit Iran very hard for firing on a ship in the Strait of Hormuz.

Iran retaliated by firing on U.S. bases in the region.

This morning, there is significant confusion regarding the status of the Strait of Hormuz.

Iran has declared the Strait of Hormuz closed.

The U.S. is saying the Strait of Hormuz is open.

From our sources, there is hardly any traffic in the Strait of Hormuz as of this writing.

In our analysis, oil is rising a relatively small amount compared to what the weekend events warrant.

The reason is there is a long history of the U.S. administration coming out with positive statements regarding Iran every time oil starts going higher or the stock market starts going lower.

Professional traders are expecting a positive statement from the administration, and this hope is containing the stock market’s drop and oil’s rise.

Tomorrow, four critical hours are ahead.

During a span of four hours, the stock market will have to confront the following: The first important set of earnings from banks, including Bank of America Corp (NYSE: BAC ), Citigroup Inc (NYSE: C ), Goldman Sachs Group Inc (NYSE: GS ), JPMorgan Chase & Co (NYSE: JPM ), and Wells Fargo & Co (NYSE: WFC ), will be tomorrow before the regular session open.

Whisper numbers for bank earnings are running ahead of consensus numbers.

Consumer Price Index (CPI) will be released tomorrow at 8:30am ET and may be market moving.

Fed Chair Warsh is scheduled to testify before the House Financial Services Committee tomorrow at 10am ET and before the Senate Banking, Housing and Urban Affairs Committee on Wednesday at 10am ET.