NFTRH; One Sector of Interest and its Implication for Another

We are now into H2 2019. It’s amazing how time flies. The Semi industry has been targeting H2 2019 for a bottom and/or upturn, and here we are. For reference, linked here is Walt Custer, an industry analyst posted at SEMI projecting that “key global electronic industry monthly time series appear to have reached their 3/12 bottoms and now have begun to improve”.

As World Cycles Turn

His article contains several industry cycle charts you might want to check out.

As for our charts, they are mixed but the Semi index is conspicuously positive as the broad stock market pulls back this week. Three Semi equipment companies are shown in ratio to the broad SOX. Of those, AMAT continues to look constructive in relative (to the SOX) bottom-making and ASML/SOX may have bottomed in the spring. LRCX/SOX has been grinding an uninspiring uptrend since Q4 2018. I see the equipment stocks vs. the broad sector as a leading indicator. The lower panel updates SOX/NDX, which is a key market leader we keep an eye on. It’s still in recovery mode, although it remains questionable.


Bottom Line

  • If the Semi cycle is bottoming it would be a positive, although early signal for the US and global economy. Note the word “if”, because industry analysts are currently projecting ahead, not extrapolating already positive data. I am still holding a couple Semi stocks (NVDA, XLNX & oddball SIMO) as something of a test case as long as their charts keep me aboard.
  • As for our bullish themes in the precious metals, this need not be a cause for concern yet, as the new cycle was in 2013. That is because it is very early and indeed a new positive cycle could time out just as HUI finishes up its ‘C’ leg in the 350-370 range.
  • Of course that too is just projection. I may not be bullish enough in calling it an A-B-C upward correction or I may be too bullish. But it’s how I’m viewing it now for the counter-cyclical sector. A bull phase in the precious metals could well time out to end when a new positive cycle in Semi is readily acknowledged by a growing contingent of market participants. That would likely be several or many months down the road.