NFTRH Update 4.25.13, Chirp Chirp… Semiconductor Leadership & Economy View Updated

Well, we have had some nice data coming in that points to a would-be economic deceleration (save for this morning’s positive jobless claims report).  Yet the chip makers have popped pretty substantially.  Even (or especially) Intel, despite the ‘death of the PC’ data that has come in lately.  Regardless, we use the SOX (top panel) as a leading indicator and the AMAT-SOX ratio as a leading indicator to the SOX itself.

SOX & AMAT-SOX ratio, daily

For all the world I thought we had the Semi’s right where we (or I at least) wanted them.  With AMAT topping out vs. SOX and the SOX itself having broken an uptrend channel and formed a topping pattern.  Well, today’s spike is compromising that view.  The story will be told at resistance (SOX 445) as you can see by the chart.

I will not fight this market if SOX breaks out and other recently weak leaders like the Transports and Small Caps gain traction.  In fact, yesterday I bought back into the US manufacturing sector again with DDD (for the 3rd time) and FARO, which is a company I owned at 4 bucks (out since 25) long ago and did DD to the point of having them visit me and demo the products in my previous life as a US manufacturing company owner.  This time it is a simple chart buy on a correction and gap fill.  We’ll see.

I also longed a few other stocks and Indonesian small caps and increased allocation to Singapore, the most financially sound economy in Asia.  All of these are against the US stock market puts I have been holding for a longer-term play.  If a real global economic bounce (back) or bump is in the cards, I’ll have to consider dropping these puts, but for now they are held.

We should watch copper and the industrial metals along with other commodities that could indicate an economic bounce is coming.  Other aspects of Asia and emerging markets could be interesting.  Meanwhile, the big picture is economic contraction with the only question remaining how intermittently successful will policy makers be in pumping life into it?

The copper miners ETF COPX is up nearly 4% today.  This is probably an over sold short covering reaction in the copper mining sector.  But again, we should (and will) watch for signs that the base metals are repairing their technicals just as we do the precious metals.

The Semi’s, Transports and Small Caps are trying to make those signs right now.  Stay tuned.

[edit] For newer subscribers, the ‘chirp chirp’ in the title is due to the Semi’s status as a canary in the coal mine for the US economy.  We used Semi strength several months ago to gauge a coming economic bounce, which manifested.  The current bounce in Semi’s does not square with recent poor economic data.