Tag Archives: Semiconductors

Semiconductor Sector’s Excitement Continues

Dialing back to January of 2013, I am looking for clues about the coming phase for the economy, mostly as an input into whether or not I can think about turning bullish on gold again (here we remind you again of gold’s best investment case, which is counter not pro cyclical).

The answer, from a contact in the Semiconductor sector (AMAT, LRCX, MKSI, etc.) food chain was that the Semi equipment companies, which we called “canaries on the [economic] coal mine”, were ramping up and thus NFTRH’s view became bullish for the economy, at least short-term.

When this information was combined with the following chart of the Palladium-Gold ratio, which had proven a good economic backdrop indicator, the case for a firm economic phase was even stronger.  Then followed a string of strong ISM data, a stabilizing ‘jobs’ picture and voila, here we are in Bull Party Central with trend followers everywhere looking good and touting to cement their reputations.  But I digress…


Here is the monthly view of PALL-Gold showing that the economy may not be done yet, although the break above resistance (now support) is still very tentative…

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Semi Bullish

The semiconductors have led the way.  First in Q1 of 2013, when NFTRH subscribers were alerted that the semiconductor equipment companies were ramping up and then through the big long-term breakout in February of this year, the Semiconductor index has led the way.

In case #1 (the Semi equipment ramp) the implication was for a strengthening economy at a time when everyone thought otherwise.  What happened?  The canary in the coal mine chirped and the economy strengthened despite indignant emails I got to the contrary.  All of this was against a media hysteria about the Fiscal Cliff with even a family member / financial adviser advising that the best and brightest fund managers were in cash (at Thanksgiving, 2012).  Ha ha ha.  “Bullish!” said I to the drop jawed family member.  “Reeeealyyyy???”  Ah yah, really.

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Semiconductor Index

The daily chart of the Semiconductor Index remains constructive above the 10 year breakout support line and now, with a rise above the 50 day moving average, is trying to get bullish again.


The green arrow shows a higher low and the red arrow shows a lower high.  Ultimately, one of these parameters is going to break and send SOX off on its bullish or bearish way.

Semi Retrenched

I may regret this but the rest of the Semiconductor items are now closed out.  That includes SIMO, which delivered what I think is its first loss to me this morning.  Also, EZchip went back to being not EZ.  :-(

SOX is still above support, but as of this moment it’s got a big ugly candle and I am not thrilled about what some other markets are doing (hello NDX, RUT).  So cash is good for now.


US Stock Market Snapshot

The Nasdaq 100 has dropped to an obvious support level (50 day MA’s & lateral visual) from the top of a Reverse Symmetrical Triangle.


NDX weekly from NFTRH 280

Other leadership indexes like the Russell 2000 (small caps) don’t look so hot either, and yet here stand the Semiconductors, with SOX still above the important breakout line and still doing its Bollinger Band creep routine.

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Semiconductor Stocks, While Biding Time

Unlike people making a big deal about PDAC over the last few weeks (I really do not care what is going on in the world of small would-be miners, each with a pitch at the ready) I find freedom in being a macro market person who just happens to be a precious metals bull.  That means when the precious metals are not happening (like this week’s expected reaction) I am able to literally deal in a world full of markets.

With a great big hat tip to an NFTRH subscriber (who seems to know exactly what I like in charts) the chart below shows my current Semiconductor holdings that are making a day like today in the precious metals a little easier to handle.

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Decision Point for the Semiconductor Index & Hence, the Market

The SOX is dropping to the 10 year support line.  We will now see what bulls are committed and what bulls are not as the market takes a moderately scary drop today.


For perspective (always a good thing), here is the monthly view again.  It’s for all the marbles in the ‘will they or won’t they (blow off)?’ sweepstakes with regard to US stock markets.


Watch Semiconductors’ Market Leadership

In January of 2013 NFTRH used the Semiconductor sector as a ‘canary in a coal mine’ to a potential coming phase of US manufacturing strength and an economic bounce.  This had negative implications for gold but normally would have had positive implications for commodities positively correlated to the economy.

That did not materialize in 2013 (as China decelerated) although with the recent launch of various ‘outlier’ commodity sectors like agriculture, natural gas and uranium along with persistent strength in crude oil and the highly speculative TSX Venture Exchange (CDNX), we now consider the view that some inflationary chickens (rising cost effects) may be coming home to roost.  The economic bounce was after all instigated by an inflationary mix of ZIRP on the Fed Funds rate and long-term Treasury bond buying.

We are managing precious metals and commodities on an ongoing basis, but today I want to focus back where it all began, with the canaries in the coal mine.  Our early alert came in the form of personal information received about a ramp up in Semiconductor fab equipment orders from a friend in the field.  If fab equipment companies like Applied Materials and Lam Research were ramping up then it meant that the Semiconductor companies themselves were gearing a new build cycle.  This was ‘early warning’ stuff.

But now the Semiconductor index itself, which has led the rally since Q4, 2012 (and is still leading despite some other leadership indicators like the BKX-SPX ratio falling off lately) is at a very important big picture pivot point.  Here is SOX-SPX, showing leadership during the most intense phase of the cyclical bull market…


Dialing out to a monthly view of the nominal SOX index we find the really compelling picture.  The Semiconductors are technically above 10 year old resistance!  ← You know I don’t use (!) very often in my analysis.  A March close above 560.68 is needed to confirm this breakout.

NFTRH has incidentally, added the SMH Market Vectors Semiconductor ETF to the extensive list of strategic ETFs charted each week (joining several precious metals, commodity and stock ETFs) due to SOX’ current status.


What I find interesting is that most rallies over the last decade have pinged along from the bottom to the top Bollinger Bands and back again.  But the current trend is much like the pre-2000 (and pre-blow off) trend as it hugs the top BB line.  This is very much in line with the current question we are asking of the markets, ‘melt up or correct here and now?’.

Put it this way, if the SOX holds above the resistance line through March, the odds become heavily tilted toward an upside market blow off, which I believe would be the nature of the bull’s end.  We have had bull market termination scheduled for spring to mid-year for many months, but a picture like the above could force the analysis to adjust this potential out to Q4, 2014.  We’ll just have to be patient and let things unfold.

Bottom Line

The red line on the chart directly above represents a key level for market players.  It is exquisite in that the implications of success or failure at this line are so very different.

Success means a cyclical bull market blow off is probably engaging that would kill every bear before eventually wiping out greedy bulls (silver 2011 style) who over stay their welcome.  Alternatively, take  the breakout as a given at this moment and one risks the pain of a potential reversal and failure.

Regardless, the potential of the SOX is very clear.  The best (and crazy sounding) measured target is 953.  Improbable I know, but how much about this bull market has seemed probable well in advance?  Respecting potentials and probabilities while keeping ego and intellect under control will see us through.  So will following the market’s road maps, like the one above.  It is very clear.

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Semiconductor Equipment Stocks Updated

The Semi’s have been very helpful to me in navigating the macro economic and market environment since I found out in January that their business had perked up.  I’ll be interested to see if AMAT and LRCX can hold above the 50 day moving averages and if so, if the lesser likes of MKSI and BRKS can play some catch up.

I own some MKSI for a trade on a short leash as defined by the support level just below the current price.

amat, etc