According to reports from Citadel Securities, the semiconductor sector is experiencing a significant shift as retail traders turn net sellers after a prolonged period of dip-buying. The SOXX fund, which tracks the semiconductor index, sits about 15.7% below its June high, marking a notable cooling in AI chip stocks. Scott Rubner, Head of Equity Derivatives Strategy at Citadel Securities, identified this pattern as particularly rare, noting that retail clients turned net sellers of chips on two down days, July 2 and July 7, as the Philadelphia Semiconductor Index (SOX) fell about 5%. As reported by Citadel, this selling into a falling SOX is extremely uncommon, with Rubner counting only about eight such episodes over the past year.
According to Citadel's analysis, the SOXX has dropped about 16% from its June high, yet it still trades roughly 80% above that March base, where the signal last fired. The firm's proprietary Retail Capitulation Radar (RCR) tracks two leveraged chip funds, SOXL and SOXS, which aim to move two or three times the semiconductor index each day, with retail traders dominating these instruments. As reported by Citadel, in Rubner's retail-selling episodes since February, chips rose over the next five to ten days every time, with a median gain near 18% over ten days, and the March case rose about 29%. The firm's wider net test, catching ten cases, shows a median gain near 7% over the next ten days.
According to Citadel's analysis, the radar reads idle at present, as the selling pressure is elevated but still short of the critical threshold. The latest session showed a 5.45% jump, which the tool ignores as it only fires when heavy retail selling meets a falling market. However, as reported by Citadel, Nvidia and AMD absorbed the selling best, holding buying support while their prices slipped, unlike most peers, suggesting they would likely lead any turn back up. The next major catalyst approaches with Intel reporting earnings on July 23, and options traders are leaning bearish, with puts outnumbering calls on both volume and open positions, and the market bracing for a 5.2% swing around the report.
