Gottfried -
If you extend your weekly stockchart graph of SOXX to 2 years (http://stockcharts.com/def/servlet/SC.web?c=$SOX,uu[w,a]waclyymy[d19990401,20010510][pb30][vc60][iUb14!La12,26,9!Lc20]) it's clear that the MACD peaked (and started diving) in February, 2000 - about 6 months before the sector as a whole crashed. More recently, the MACD bottomed (and started climbing) in early December (as you observed) ...and it is now six months subsequent to the turn!
Thus an interesting message emerges from that chart: we’re seeing the exact opposite pattern of last spring. The equipment stocks bottomed in December and, after this period (February -> May) of establishing a new base, the sector is likely to take off at any time. In other words, looking closely at this chart, the appropriate and inescapable view is to anticipate a strong move up since the likelihood of further downward movement is slim. In addition, we’ve had an incredible easing by the fed (together with a less well advertised huge increase in the money supply) that will assuredly boost the economy during the next 24-36 months. I don’t see much import in the next rate cut since the attitude of the Fed could not be clearer (they’ll do whatever it takes); the level of the next rate cut will not determine investors behavior since the bulk of rate slashing has already been accomplished.
Since the equipment sector bottomed in December and there won’t be any more selloffs in the stocks, the idea of buying semiconductors cheaper than they are now is an unlikely scenario. Those wishing for lower prices are failing to look objectively at the recent patterns in the sector and are placing subjective desires ahead of dispassionate observations.
We’ve been through the first phase of recovery in the equipment stocks (where most stocks are up 50%+ since December) and we’ve treaded water for quite some time since this mid-winter surge. This pause has now set us up for stage two of the recovery - the stage that often sees the greatest gains - and this next surge is will probably begin very soon. And with this morning’s report of an extremely modest rise in produce prices in April (giving the Fed more room to cut rates) and a 0.8% rise in retail sales in April (breaking a two-month streak of declines and indicating consumers still remain willing to spend), I feel the semiconductor equipment sector is the place to be.
RIGHT NOW. |
