Semi Equip b2b & Market Notes

The Semiconductor Equipment book-to-bill data are out and while June eased a bit it did nothing to cause any disturbance to Q2’s numbers.  This means that through the April-June quarter the reported data of the 3 month averages remained strong.  Bookings have however gone on a slight declining trend over the last 3 reports.

“The June book-to-bill saw slight declines in the three-month averages for both booking and billings compared to May,” said Denny McGuirk, president and CEO of SEMI.  “Both figures, however, are above the trends reported one year ago and the first half of the year has been one of positive growth.”


Once again, here is the historical graphic I created last weekend.  Bookings and billings continue to be on the gentle uptrend from early 2013.


What this brings us to is the question about the Semi sector’s leadership.  Here is the status of the SOX vs. SPX.  While the broad stock market has recovered from the Greece hysterics, for some reason Semi has been left behind.  It is time to use the still okay b2b data and resume leadership or else there is something else going on with the markets.


As we noted in NFTRH 352 the broad market sentiment backdrop had recovered (dumb money bought the post-Greece rally) and is at high risk.  Junk bonds and Junk-Quality credit spreads have taken on a bearish look this week and that implies fading speculative momentum.

If the market corrects but Semi retains leadership I am going to consider it a potential buying opportunity (assuming Semi Equipment earnings and projections look positive this Q as implied by the b2b), but only if the market appears to be in a healthy correction.

I would not consider the thing that went on during the Greece-China disturbance to be healthy.  That was all hype and sentiment fluctuation, not a healthy correction.

However, we are also in a window for a potential end of the cycle (which is why I have doggedly held my SPY short) and as data gather and if they point to something worse than a healthy correction there will be little or no stock buying.

As it stands now and speaking personally, anything is available for sale even if it is only a correction in the cards.  A load of cash will come in handy not only if needed for a stock market (esp Semi sector) buying opportunity, but for what I consider a potentially big opportunity to be positioned correctly for a macro trend.  That would be in quality gold miners and exploration.

We will cover the progress there as events play out.  But for now, little has changed since the last updates on the sector on Monday.  HUI could bounce at 110 +/- (it hit 112+ on Monday) but the target is 100 +/-, which of course means it could go sub-100 if the (-) wins out.  So be prepared for anything.

Back on the broad market, the above speaks as if a stock market correction (at least) is assumed.  Let’s also remember that this thing is in an uptrend and current cycle trends are in place… i.e. stock markets up, gold down as but two examples.  There seem to be signs that the market is vulnerable (example: VIX at its lows again) but it remains a whipsaw until at least daily trends turn back down.  The Dow, Transports and SOX are three lonely indexes that have done that amidst a speculative frenzy elsewhere.