Still Watching the Semis and Market Leadership

We began our little exercise back in November, noting a dangerous MSM article pumping the views of a fund manager who promoted the great relative value the Semi Equipment stocks, like AMAT and LRCX in an over valued market.

sox

2 days later AMAT, LRCX and the SOX itself cracked and eventually we projected a bounce. Last week we updated the bounce, which was still in progress.

Now, per the chart above SOX has a decision to make; take a new leg up in the bear flag or break down from it? I really don’t care what SOX does other than as a cyclical indicator. If it goes bearish it will be important not to go whole hog bearish the markets due to this one signal because it is an early bird. The market may rotate to other areas. If it goes bullish again then party on Garth, but that will not change the risk in this sector, which will find living up to cyclical growth expectations difficult next year.

So anyway, here are the Semis vs. Tech. This is the leader’s leader leading the leader. The bounce is still on but in consolidation.

smh/qqq

Tech has gone lame vs. the S&P 500. This bears watching. For now, the market’s leadership is intact, and it is silly Santa season after all. But this leadership should be watched for recovery or failure in January.

qqq/spy

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