If there's any one equity group that investors like to use as a leading indicator, it's the semiconductors. And if the semis are in fact "leading," the economy and the market should be in store for some nice future growth. As shown in the top chart below, the Philadelphia Semiconductor (Sox) index is now up 36.13% year to date versus the S&P 500's year to date gain of just 3.74%.
In the bottom chart, we provide a ratio of the Sox to the S&P 500 going back to the start of 2007. As shown, the relative strength of the Sox began to weaken in mid-2007 and it bottomed out in late 2008 well before the overall market bottomed. Since then, the relative strength of the semis has been exceptional, and it just broke to new highs this week. Again, if this is a leading indicator, we're in store for good days ahead.
SOX is already at the top of its recent range. If SOX is a leading indicator (which seems as a stretch, it is just have high beta) I would rather watch it retesting last low around 200 and if it had held that could be a big promise for a whole market.
Posted by: mt | July 17, 2009 at 09:46 PM
A massive bearmarket rally w/ govt sponsorted brokerages like GS using funny money to speculate and recapitalize banks' balance sheet that are essentially insolvent..
The financial sector is a huge albatross , a sheer waste that needs massive trimming down before US economy can grow. This sector needs 30-50% reduction...it is highly bloated inhibiting US growth and engaging in mindless casinolike shuffling useless papers and tradeing derivatives from each other. I have more respect for a burger flippers.
Posted by: andiron | July 18, 2009 at 08:59 AM