BUZZ-After chip indigestion passes, rise should resume vs broader tech

** Chip stocks have been outperforming broader tech; VanEck Vectors Semiconductor ETF spread vs Technology Select Sector SPDR Fund widened to its highest level in over a year

** SMH tracks semiconductor production and equipment cos; Intel (Euronext: INCO.NX - news) largest ETF holding end-Jun at 14.2 pct TNA, while XLK large-cap tech, with Apple (NasdaqGS: AAPL - news) biggest exposure at 12.7 pct

** SMH now up 16 pct YTD vs XLK gain of only 7 pct

** As chipmakers rallied on Softbank bid for Arm Holdings (LSE: ARM.L - news) , SMH-XLK spread closed at $16.34 on Weds, putting it just shy of its May 2015 peak at $16.44. Chart: http://tmsnrt.rs/2aB9nkK

** Since, spread dipping back on spate of mixed results; INTC drops on slowing growth in key data center unit , easily outweighs Advanced Micro Devices (NasdaqCM: AMD - news) hitting 4-year highs

** And although Qualcomm (Hanover: QCI.HA - news) rallied strongly on its improved outlook, Skyworks disappointing forecast helped to add to spread pullback early today

** S&P 500 hitting major resistance zone heightens risk for market instability and could lead to larger drop in higher beta SMH vs XLK

** But Nasdaq Composite attempting breakout above its resistance, and as long as 2134/2108 contains SPX downdraft weakness should be corrective

** Thus, although spread (now $16.06) at risk for further contraction, as long as $15.30/$14.58 holds, should ultimately exceed $16.44; target $19.00 area to meet double-bottom pattern proj