SOX Breadth Indicator: How to Read It

I previously shared this indicator. You can find the script in this post below. It’s free. Make sure to utilize it in your workflow.

Also note that the script contains actual tickers of individual stocks that are in the index, and index constituents change from time to time. So, once such changes occur, the script will stop working. All you have to do is to update the tickers. This is extremely easy, and you can ask your AI to do it.

This indicator tracks the 30 stocks in the Philadelphia Semiconductor Index (SOX) and counts, every day, how many of them are still trading above their own moving averages. The index itself is cap-weighted, so NVDA, AVGO and TSM alone can lift it. This is a breadth indicator (equal weight). Comparing the two shows whether a move has broad participation or is being carried by a handful of mega-caps.

The Four Lines

Orange (thick) is the main line. It shows the percentage of the 30 stocks closing above their 50-day moving average. A reading of 90 means 27 stocks are above; a reading of 10 means only 3 are. Above 80 is everyone euphoric; below 20 is everyone flattened.

Cyan (thin) is the 20-day version. It reacts fastest and is the noisiest; dropping from 100 to 0 within a week is normal. On its own it says little. Use it to read the direction of the orange line: cyan falls first and orange follows means the pullback is spreading; cyan bounces while orange stays flat means a short-term rebound only.

Magenta (thin) is the 200-day version and moves slowest. It shows how many stocks still have an intact long-term trend. As long as it holds above 40, a pullback is a pullback within a bull market. Below 20 means the long-term trend is broken; in nearly three years that happened only in March–April 2025.

Gray (thin) is the 10-day average of the orange line. It is not a stock count; it only smooths the orange line so you can see when it turns. Orange above gray means breadth is improving; orange below gray means breadth is deteriorating. When the two cross inside an extreme zone, that is when the small triangles appear.

Two Zones of Shading

The horizontal pale-red band (above 80) and pale-green band (below 20) are fixed scales with no signal meaning. They only mark where the extreme zones are.

The vertical red and green backgrounds are signals. Red means all three lines closed above 80 on the same day: on the 20-, 50- and 200-day view alike, almost every stock is above its average. Green is the opposite: all three lines below 20 on the same day. Green is rare; March and April 2025 are the only two occurrences in the past three years.

Small Triangles

Green up-triangle at the bottom of the pane means the orange line has fallen into the lowest 10% of its two-year range and has just turned up through the gray line. In plain terms, “the selling is exhausted and breadth is starting to recover.” Two appeared in a row at the April 2025 tariff-crash bottom; SOX gained about 60% afterwards.

Red down-triangle at the top means the reverse: orange is in the top 10% of its two-year range and has just turned down through gray. “Euphoria has peaked and is starting to cool.”

The Orange X

The X fires when the index makes a 40-day high but the share of stocks above their 50-day average is more than 8 percentage points lower than at the previous high. The index is rising while fewer stocks participate; the gain is being carried by a few heavyweights. This is called a breadth divergence and is the most common warning near a top.

Historical Examples

2024

• Mid-April (April 19): orange and cyan both fell below 5. The index then rallied about 30% over two months.
• Early August (August 5, the yen carry-trade unwind): cyan hit zero, orange about 3. That day was the low of the cycle.
• Early March and early July: two red-background episodes, matching the March 8 and July 10 interim tops. After the March red zone the index corrected only about 15% before making new highs; the July one was the real top.
• Two X marks, one in early February and one in mid-June, came about a month and three weeks before the actual tops. The X gives direction, not a date.

2025

• An X in mid-January was followed two weeks later by the DeepSeek shock and a one-day semiconductor rout.
• March and April produced green backgrounds with all three lines below 20, the rarest signal in the toolkit. Two green up-triangles in early April marked the tariff-crash bottom; the index rallied about 60% from there. The boxed area on the chart is a textbook bottom.
• The red triangles in June and July and the X in mid-August were followed by consolidation and a shallow dip, then higher prices. Topping signals largely did not pay off that year.

2026

• Late March: orange around 10, cyan around 5, magenta holding above 40. No green background, no triangle, yet that was the year’s low. The index gained about 60% from there.
• Late April to early June: red background on and off for about two months, three red triangles in May. The actual top came in early June. Selling at the first red bar in April would have missed roughly 30% of upside, but before the July sell-off, multiple warnings have been fired.
• Late September: an X. Early October: all three lines briefly above 80, red background. The top came around October 5. Over the following week and a half, orange fell from 93 to 13, cyan went to zero, and the index gave back more than 10%.

How to Use It, and What It Cannot Do

Bottoms are more reliable than tops. In three years the orange line dropped below 15 five times (April 2024, August 2024, April 2025, March 2026, October 2026). In the first four cases the cycle low came within two weeks. Panic is released all at once; everyone sells together, and when they are done there is no one left to sell. That makes bottom signals clean.

Top signals say “expensive,” not “falling now.” Euphoria can persist for weeks or months; the April–June 2026 red zone is the example. The right use of red backgrounds, red triangles and X marks is to tighten stops, stop adding, and reduce leverage, not to short. When all three stack up (X first, then red zone, then triangle), the top has historically been one to two weeks away.

Check the magenta line before trusting the orange line. With magenta above 40, an oversold orange reading is a buy zone within a bull market. With magenta below 20, the same reading is a pause in a downtrend. After the March 2025 green background the index fell for another month before the real low.

Where We Are Now

As of the October 16 close: cyan 0, orange 13.3, magenta 46.7.

The orange line is inside the extreme zone below 20 and cyan is at zero. The orange line has fallen below 15 four times in the past three years (April 2024, August 2024, April 2025, March 2026); this is the fifth. Magenta is still holding above 40, the same structure as the previous four.

That is everything the indicator can tell us. It says selling pressure has reached a historical extreme. It does not say the market rises tomorrow. Bottoms are confirmed in hindsight, and whether prices stabilize here or take another leg down, we will find out next week!