In the original post I gave two legitimate reasons I was short MKSI (semi equipment sector fundamentals and an un-actualized technical topping pattern) and one illegitimate reason (I don’t like the company or the guy running it). Owing to reason number 3, I was dismayed as the market reacted very bullishly out of the gate. I held it short, with the thought ‘eff you, I’m gonna let it settle out’. I am biased slightly more long than short at the moment, after all. No pressure.
 Not a bad day at all. Longs went up and at least one out my 3 shorts went down.
Technicals and fundamentals are diverging in Semiconductors
3 years ago we got the highly technical inside scoop on the Semi’s from a former associate of mine. I don’t recall the direct quotes but it was along these lines…
Hey Gary (he’s a Gary too), how’s the Semi equipment business doing?
Well Gary, we are ramping up big time and expect a big 2013.
Wow, okay thank you.
At which point I wrote a couple NFTRH updates that included this ‘bad’ news for the gold sector (because it was good news for the US economy). Last week he told me something quite different in no uncertain detail. We reviewed that as well in an update last week and it goes along with the most recent book-to-bill and worldwide Semiconductor shipments data.
When everyone hated AMAT, we did an NFTRH+ trade idea on it. Now it has exceeded the target and run up to the resistance zone noted last week here at Biiwii.
Chart guys are now emerging left and right to help guide us through the bullish Semiconductor landscape. Maybe a little late there boyz. Momentum traders love, you know… momentum. So they are just doing what they do. But when the momo expires and the sector is left with nothing but funda’s, it’ll be on to the next flavor of the day.
Applied Materials Runs to Target
We highlighted AMAT in an NFTRH+ update on October 22. I bought it as a laggard ‘catch up’ play after taking profits on the SMH Semiconductor ETF. I then took profits too soon on AMAT, but that’s me all too often.
Here is one of 2 charts used (a daily and a weekly) in the original update. I have turned the RSI green and added a resistance zone to the chart. The original target was 18 and the trade should be ending for those who took it as a trade.
It was hard to buy the Semis (SMH) at the September low but somebody had to do it. Now the technical traders are getting on the Semi sector. Good for them, they are momentum chasing technical fly boyz.
People think I am a chart guy but a chart is only part of the story and IMO those who think of charting as a stand-alone discipline in trading or investing are another flavor of the various cults and casino patrons that populate the financial markets.
Sure, the daily SOX has an intriguing little bullish looking pattern but the weekly is not so bullish. We covered this and a brief fundamental take (book-to-bill ratio) in a public post at nftrh.com yesterday and in a more detailed NFTRH update the day before. I have also ‘channel-checked’ with a former colleague and I’ll be sharing his ‘boots on the ground’ information in NFTRH 371 this weekend.
The Semi equipment sector (AMAT, LRCX, KLAC, etc.) was the bullish economic canary in January 2013 and it could be setting up that way again, this time going the other way. Funny how the fundamentals are turning even as many of these stocks rip higher. Good old Wall Street (cue our Feb. 2014 criticism of the 3D Printing promotion):
3D Printing; No Barrier to Future Losses for Investors
This is another somewhat sermonizing post from your friends at biiwii.com simply asking you to realize that the market is an ecosystem of technical and fundamental analysis. Just ask shell shocked gold traders all these years later. Fundamentals matter, and we had a big positive one out of the forward-looking Semi’s in January 2013. Now we have a whole other kettle of chips.
Hey, have a great Thanksgiving if you are celebrating!
We noted in an NFTRH update that the Semi’s were conspicuous in their strength yesterday. That was a good forebear for today’s broad strength. The Semi’s have been a leader since they brought the whole mess out of the late 2012 doldrums. Here is Semiconductor sector ETF SMH with an improbable (and very doable, market willing*) target.
SMH broke the neckline, tested it and popped.
* It is highly doable assuming that our view that the bearish stuff is probably in interuptus for several weeks at least is correct. In other words, it’s all part of the relief bounce scenario within a larger bearish picture.
In the interest of maintaining the tradition of highlighting my failures I will note that there was an NFTRH+ update on Intel based on the H&S pattern. My personal risk tolerance was above 29 (neckline), which was also noted as a tight stop loss level in the update (it is critical to limit losses because they sure are going to happen) and so I took a small loss.
But the bull case is not yet proven either as the baby Inverted H&S, while cute, has not broken above its neckline. It’s target is around 33 if it does break through. MACD and RSI look good.
You may recall that we were bullish on Intel and the Semi sector since before anyone started getting excited about the Semi’s, as Intel broke above a 14 year resistance line. Now I am neutral on Intel and indeed, the Semi sector pending the broad market view, which continues to go amazingly well to our post-August layout.
It has been a while since we went around DARPA’s creation (or was it Al Gore’s?) of networked thingamajigs…
NFTRH 355 takes the balls in the air, tops spinning on the table and the up and down market whipsaw and attempts to distill it all into a sensible narrative for this very moment and what is out ahead.
In that it provided me with everything I need with respect to my parameters and risk tolerance for the short and long-terms, it did its job very well. I think others will find that to be the case too.
As we await the Semiconductor Equipment sector’s Book-to-Bill data for June, we observe that Semiconductor sector leadership (SOX-SPX) is still intact in the US stock market.
This sector is noteworthy because it was a real indicator in early 2013 of the general strength to come in manufacturing (Semi Equipment cycles often do that) and later, employment and the ‘services’ economy.
Today SOX-SPX rests at a decision point and the bulls have the ball as long as that point is not violated. The answer here will be especially important given that its 2013 indicator running mate, Palladium-Gold, is very bearish now.