Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Details Behind Semiconductor Stocks Leadership

Companies / Tech Stocks Jun 23, 2016 - 10:38 AM GMT

By: Gary_Tanashian

Companies

I am prompted to write this article because TA’s are starting to pick up on the Semiconductor index’s bullishness and even the overwhelmingly bearish website, the Daily Reckoning is calling bull on the Semiconductor sector.

These Tech Stocks Are Ready to Lead the Market. Before Buying, Read This…

The author uses only charts to clue readers in to this little secret (Semis led the market down and now they are leading it up) but there is much more to the story, and since it has been our story (for its upside and downside market leadership) since 2013 I’ll lay claim before the whole enchilada opens up and every wise guy with a chart or a stock pick is touting the Semis.


In NFTRH we have been noting the relatively bullish status of the SOX (and this week, in light of the May book-to-bill, begun charting equipment stocks in NFTRH+), along with a few other ‘relative bull’ sectors.  But I came across the most compelling evidence of a Semiconductor revival quite by accident while running through the US market indexes.  Well, it was on purpose, but I was surprised at the timing as you’ll see.  Here’s a clip from NFTRH 400…

<begin excerpt>

I took a long on the Banks [edit: quick profit taken on Monday, along with another on rising rates vehicle TBT] as BKX dropped to support. That did not reflect a view on the pigs, it reflected a view on the hysteria surrounding declining interest rates, inflation expectations, etc. The warning here is that hysterias can last longer than your trade tolerance, so I’ll not be too patient. SOX is still bullish and the book-to-bill data will be out on… folks, we interrupt our regularly scheduled programming for (see below)

Attn: Stock Market Players & Gold Bugs Alike

I just went to check the date of the coming SEMI equipment sector book-to-bill data release and what did I find? This is what I found. Unexpectedly, it is already out.

Booking, Billings and Book-to-Bill for May are a knock out. What’s more, we now have a 3 month trend in Semiconductor equipment bookings. With the strong billings as well, we probably have the makings of a good reporting season for Q2 (April-June) unless the world ends this month.

From SEMI: “Bookings and billings for new semiconductor equipment continue to improve,” said Denny McGuirk, president and CEO of SEMI. “The data are consistent with higher spending expectations for the second half of the year.”  Full report here.

Here I want to make some notes to my gold bug friends, of which there are many in the subscriber base. Just as we noted Q2’s reporting may see some degradation in Q2 reporting for the miners due to the sharp rise in oil vs. gold, we note that the likes of AMAT, LRCX, MKSI, etc. are likely to continue to show why the SOX index has been firm and leading the US markets of late, when Q2 is reported.

I felt squeamish in noting the Semi Equipment strength and its economic implications to you back in January of 2013 and in hindsight, these are the financial markets and there is no place for squeamish. The facts are the facts and Semi Equipment is ramping up again. This furthers our recent theme about the potential for a whopper of an inflation phase forthcoming as the Fed rolls over time and time again, ignoring price signals like those in the services sectors and lately, in the ‘prices paid’ in manufacturing reports.

I am getting very bullish on inflation. So this time the Semi ramp does not need to mean destruction for the precious metals. Indeed, if silver picks up on this and takes over, we could get a heck of an inflationary ride, eventually. But remember, we are early and the mainstream is all screwed up over the deflation the Fed is pretending to see, BREXIT, global NIRP, etc. This all reaffirms what I wrote in the opening segment [edit: also excerpted, for NFTRH’s 400 milestone].

Frankly, I am getting so excited I have to settle down and remember that you can be right but you can be early. But with this SEMI release, combined with recent inflation data and price signals, combined with the state of the global market’s mass psyche (oh no… deflation is everywhere!!), I think there is an opportunity here to make like Old Turkey* and be right, start to position for inflation, and sit tight.

There will be more to come in NFTRH reports, and in updates we will track the process and identify trading opportunities. Another note for gold bugs; if we go ‘inflation’ the recently expressed preference for exploration and especially Royalty companies over pure gold miners will become a priority theme going forward.

Back on the US market, SOX continues to lead US indexes in a bullish manner since leading the market bearishness of last summer. Is this signaling a new bull cycle out ahead? Stay tuned.

If this divergence holds through the current market upset and whatever is directly ahead we should consider it a positive divergence on the stock market and the economy.

* The famous character (also known as Mr. Partridge) from Edwin Lefèvre’s Reminiscences of a Stock Operator (“well, this is a bull market you know!”).

<end excerpt>

The point of the above is that you have got to have fundamental facts supporting your squiggly lines, AKA charts, otherwise the likes of the Semiconductor sector is just a ‘momo’ play, potentially sucking you in at the behest of chart jockeys.  I had awaited the 3rd month on the book-to-bill as a fundamental trend confirmation, and it was a knock out.

Gold bugs, who I have noticed are generally in full obsession mode (as in, ‘I am a gold stock trader’ as if it is the only sector out there) should be careful going forward.  While we are working on a theme that could swing inflationary (benefiting the metals and Royalty companies if not as much gold miners) the relief that would be signaled if our view of the Semis (as upside leaders) is correct could hammer gold’s risk ‘off’ premium, along with that of Treasury bonds.

The main point is however, that we have got to deal with whatever the facts are.  One fact is that the Semiconductor Equipment sector’s ‘bookings’ are very important to the entire sector’s food chain.  In other words, if new Fabs are being built and equipped then down the road Semiconductor manufacturers are expecting a ramp up in business.  That is why I call the Equipment stocks the “Canary’s Canary”, with the sector as a whole being a leader but the Equipment sector’s book-to-bill being an even earlier indicator.

There, now we have put some context to the coming phase when every momo, stock picker and chart jockey on the planet are going to get on the tout.

Post-Script

I remember in 2002, 2003, 2004… as I became extremely bullish on gold I had Robert Prechter constantly in my ear telling me why 320 was the top and then 370 was the top and then 420, etc… it made me a stronger investor to read this (I did and still do respect this scary man’s views).

On the current situation with the Semis, I was taken to task by a subscriber (I invite and welcome critical feedback at all times) a couple weeks ago (included in this post: It Must be a Gold Bull Market Because…)…

“[Otto at IKN] says buy hold win and you are saying this is a blowoff [in gold] and people saying stocks are overbought are not right either. Bill Fleckenstein, Fred Hickey and Jesse Felder are all taking opposite stance on semis and the stock market and I don’t consider them robots. I guess this makes markets.”

I have not called it a blow off in gold.  I have called it a launch to a potential new bull market.  And in holding gold since 2003, I have to believe I am in the “buy, hold, win” club.  But the point is that experts will often challenge your stance (Fred Hickey is evidently a technology expert bearish on tech in general, Semis in particular, and bullish on gold and gold stocks) but going with your own analysis or at least vetting that of others ultimately makes you a stronger investor or trader.

There do not need to be dividing lines like ‘I am a gold bug and so that is mutually exclusive to other market views’.  There just needs to be right, within the context of time frames.  At this point of the current cycle the Semiconductors are leading again and that has in the past meant positive future economic prospects.  However, with the Fed sitting like a mother hen on its measly 1/4 point Fed Funds rate, inflationary chickens could well be coming home to roost on this cycle as well.

Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates (including Key ETF charts) and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com and Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2016 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in