No Signs of Recovery in Semiconductor Industry

Relative charts are useful devices for filtering out the effects of the overall market. Further to my last post on the homebuilders, I decided to look for signs of a recovery in other industry groups as the market has moved from rallying on signs of stabilization to rallying on indications of a cyclical recovery.

The semiconductor group (SOX) is an ideal indicator, as the semis were not directly impacted by the mortgage and banking meltdown. The chart below shows the relative performance of SOX against the S&P 500 Technology Index. Technology had led much of the rally since late last year and this relative chart shows the performance of the more cyclical semiconductor group against broader Technology stocks.

Click to enlarge:



As the chart indicates, the more cyclical semiconductor group remains range bound relative to Technology stocks. Despite Intel’s positive report last week, there is no sign of a recovery from this cyclically sensitive industry.

Comments

[Michael Clark:]

Freescale has a horrible-looking chart. In my mind, it is still a short.

Two favorite shorts: ERTS and FSL.

Aug 31 06:54 AM

[Moon Kil Woong:]

LOL with the S&P tech stocks up significantly saying relatively speaking it's not outperforming is a bit misleading. Furthermore, since semis are cyclical as you mentioned, a trend upwards is more telling and indicative then the broader market because they should not move up at all if the cycle goes against them regardless of a broader based recovery.

So the argument could go, they are a real recovery even if the broader market is a big false sign. Not to say they are on fire or a raging buy, just less prone to collapsing for no reason like the banking sector.

Aug 31 07:23 AM

[Robert Cast...:]

You really need to be more accurate in you headline "No Signs of Recovery in the Semiconductor Industry". You should have titled it "No Signs of Recovery in the Semiconductor Industry Stocks". The two are entirely different. The first has to do with the reality that the economy is improving and although the unemployment rate in the US is near 10%, there are still 90% employed and there is pent-up demand for consumer items, which is the largest sector of the semiconductor industry. The latter, stocks, has to do with large investment houses pushing buttons to buy or sell millions of shares at once and paying no commissions on whatever chart of the day looks promising, whether it's oil, commodities, or bank stocks. This is not reality. If historically credible leading indicators such as ECRI are pointing to a recovery in the economy, and the semiconductor industry is indeed recovering, while the stocks aren't, then the stock market is suspect. There are still too many Mary Meekers and Henry Blodgets (remember the dot com bubble) our there.

Aug 31 01:24 PM