DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

The AI trade suffered its most frightening October in years, wiping about $5 trillion from the biggest artificial intelligence and chip stocks since Oct. 6, according to Yahoo Finance calculations. Yet the damage across the broader stock market was far less severe than the alarming headlines suggested.

Nvidia and Alphabet each surrendered roughly $835 billion in market capitalization, while Intel lost nearly half its value during October. At the same time, the other 625 large US stocks included in the tally collectively added about $1.3 trillion.

The divergence was also visible inside the S&P 500. Although the index slipped during the week, nine of its 11 sectors gained about 1% or more, an occurrence that Yahoo Finance calculations showed had not happened in any week since at least 1999.

Jeff Hirsch, editor of the Stock Trader's Almanac, calls this market anxiety "Octoberphobia." Rather than fleeing the turbulence, he said he was purchasing stocks during the decline.

"I did buy some today... this is an opportunity here," Hirsch told Yahoo Finance on Friday. He added, "The damage isn't as bad as the headlines are."

Historical patterns also support Hirsch's view. The Almanac identifies the period from the fourth quarter of a midterm year through the following June as the sweet spot of the presidential election cycle.

From the final October close of a midterm year through the end of the following June, the S&P 500 has advanced in all 19 instances since 1950. The median gain across those periods was about 15%.

Chip stocks have produced an 8 for 8 record since 1994, with a median gain of about 22%. That sample is relatively small, however, and the route toward those gains was not always comfortable.

Semiconductor shares fell another 11% or so before eventually turning upward in both 2002 and 2018. That history leaves room for further volatility even if the broader seasonal pattern ultimately holds.

The iShares Semiconductor ETF dropped about 17% in October, although it remained up more than 50% for the year. On Friday, the fund traded as low as $460, falling beneath the $464 low from July 29 that marked the summer bottom.

The fund later recovered and finished Friday at $472, placing it back above that July level. The reversal carried the appearance of a bear trap, in which a breakdown reverses and catches traders positioned for additional losses.

Hirsch viewed the timing as favorable for semiconductor shares. "Historically, seasonally, it sets up great for this period of time, the best months of the year for semiconductors," he said, while his firm placed a new sector buy on Friday.

The bullish case still faces clear technical barriers. Buyers first need to reclaim about $524, the top of the previous week's bounce, followed by the early October high near $596.

A loss of the July low would instead bring the February through April range near $370 into play. That level would stand about 21% beneath Friday's closing price.

Not every market observer is ready to buy the decline. BofA's Michael Hartnett said it is "risk-off until global rate hike ends," citing 42 central bank rate increases around the world during the previous six months.

The Federal Reserve held rates steady on Wednesday, although two officials voted for an increase. Hartnett placed his dividing line for chips at $520 on the VanEck Semiconductor ETF, which closed Friday near $522.

For the iShares Semiconductor ETF, that level translates to about $469, only slightly above the July low that narrowly held. The opposing thresholds identified by bulls and bears therefore sit extremely close together.

Hirsch said he would reconsider his position if the S&P 500 decisively broke its mid September low near 7,550. That level was less than 1% beneath Friday's close, leaving little distance between the market and his stated boundary.

Tuesday's midterm vote arrives before the seasonal setup gets its next test. After that comes November, historically the S&P 500's best month of the year.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.