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Anyone with more than a passing interest in the equity market knows that semiconductors have been one group that has historically traded in the same direction as the market. When equities rally, semis typically rally more, and when the S&P 500 declines, semis have a harder fall.

Over the last six months, however, the typical positive correlation between the S&P 500 and semiconductors has been turned upside down. Over the last six months, the S&P 500 has rallied by about 5%, while the S&P 500 Semiconductor group is down more than 10%. Over that period, the correlation between the daily closing price of each index has dropped all the way down to -0.23. This is well below the historical average of +0.66, and it's a level not seen since May 2006!

The key question investors are asking after seeing the shift in correlation is whether the decline in semiconductors is a leading indicator for the broader market or simply an anomaly.

(click to enlarge)

Source: What Happened To Semiconductors?