Semiconductor Sector: Where This Market Leader Is Heading Next

 | Sep 22, 2019 01:25AM ET

The signals have persisted since the May lows in the Semiconductor sector and in the broad markets. Nominal Semiconductor (esp. Semi Equipment) stocks and the sector’s market leaders have remained intact into our window for a projected cycle bottom, which was the second half of 2019.

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

This post shines a favorable light on the Semiconductor sector while at the same time acknowledging that may have little to do with the broad market’s fortunes as Q3’s reporting begins next month. In other words, while we have been projecting new highs for the S&P 500 on the very short-term, there are fundamental and technical reasons to believe the stock market could be significantly disturbed in Q4. But the Semi sector is an economic early bird. Let’s remember that.

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Reference first…

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Nearly $50 Billion In Fabs To Start Construction In 2020

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

By the end of the year, 15 new fab projects with a total investment of US$38 billion will have started construction and 18 more fab projects will kick off construction in 2020. Of the 18, 10 fab projects with a total investment value of more than US$35 billion carry a high probability. The other eight, with a total investment value of more than US$14 billion, are weighted with a low probability of materializing.

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

See also…

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Semiconductor Industry Upturn By Early 2020?

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Taiwan-based wafer foundry sales are often a leading indicator of global semiconductor shipments (Chart 7). They turned up significantly in August. Per Chart 8, SEMI equipment and semiconductors will likely be led by foundry sales, reinforcing the prediction of a resumption in semiconductor chip and capital equipment growth in late .

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

As a side note to the above, I do not see an indisputable tendency of Foundry sales to lead Equipment and Semiconductors, but let’s work with the author here, as he is an industry analyst and I am not.

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Moving on to this old NFTRH chart showing the leadership (up through 2017, down through 2018 and up for the entirety of 2019 so far) of two premier Semi Equipment companies vs. the broad Semiconductor sector. We have long viewed the leadership of these companies as important to future economic cycles.

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

As for the sector as a whole, the charts are not begging to differ with a positive 2020 in the least. The daily SOX index is in uptrends by both its 50 and 200 day moving averages and is also in something of a bullish ascending triangle.

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

I am reporting what I see. That is what Men Who Stare at Charts must always do, regardless of their bias (mine happens to be a desire for a hard bear market).

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

The weekly chart shows thick support between 1400 and 1450. Could some upcoming Q4 market turbulence knock it down that far? Sure could. Would it still be bullish? Sure would.

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Here is a giant Cup & Handle on the monthly chart. Those are bullish you know. Now, of course, an even larger one on Silver proved fatal in 2011, so there is a caveat to this post and to any Man (or Woman) staring at charts and trying to transfix you with the deep and mysterious things they see. The fact is chart patterns change, Elliott Wave counts change and conveniently the chartists change with them.

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

But taken at face value the Semi sector has made a higher right side to the Cup, made a Handle consolidation in 2017-2018 and has broken to new all-time highs. The 2000 high happens to be just below the thick support area shown on the weekly chart above. Short of a break and hold below 1350, the Semiconductor index is bullish on its big picture.

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

Bottom Line

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

  • Semiconductor industry analysts have been projecting an H2 2019 bottom for the Semiconductor sector cycle, after extreme growth followed by inventory buildup whacked the industry in 2018.
  • Get The News You Want
    Read market moving news with a personalized feed of stocks you care about.
    Get The App

  • In 2013 we used the sector as a canary in the economic coal mine. It chirped and we projected an economic up phase out ahead. The economy then ground upward over a span of months and years culminating in 2018’s ‘as good as it gets’ economy (ref. the economic laggards, payrolls and unemployment levels).
  • Get The News You Want
    Read market moving news with a personalized feed of stocks you care about.
    Get The App

  • The canary has been on life support, but he’s not dead yet and the charts currently say he’s going to chirp again. Industry data are still preliminary and tentative, but the balance of the picture indicates a strong Semi sector in 2020.
  • Get The News You Want
    Read market moving news with a personalized feed of stocks you care about.
    Get The App

  • This would paint any coming stock market correction, mini or maxi, as a blip before a bullish resumption into the next US presidential election.
  • Get The News You Want
    Read market moving news with a personalized feed of stocks you care about.
    Get The App

  • As for the various ‘reflation trades’, they should participate if cyclical inflation is at the root of it, which I think stands a good chance of being the case. The counter-cyclical gold stock sector would no longer be uniquely featured in such a situation (as it was this past summer and could be again in Q4), but it could participate if we echo the 2003-2008 phase where its fundamentals degraded and its prices kept rising.
  • Get The News You Want
    Read market moving news with a personalized feed of stocks you care about.
    Get The App

    Get The News You Want
    Read market moving news with a personalized feed of stocks you care about.
    Get The App

    Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
    Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
    Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
    It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
    Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

    Sign out
    Are you sure you want to sign out?
    NoYes
    CancelYes
    Saving Changes