Semiconductor Stocks Feeling Heavy

Semiconductor stocks, given their early cyclical nature are a bunch that I watch closely for clues to the broader tape.  After a major drop in the early part of the century thanks to the pop of the internet bubble and the commoditization of computer chips, semiconductor stocks as a group had a much more random  going.  Looking at the  Market Vectors Semiconductor ETF (SMH) as a proxy to the group, the lower low in late 2008 (versus the 2002 low) led to a meaningful rally into present day.  After a multi-year incline the Market Vectors Semiconductor ETF (SMH) managed to push past a significant resistance line earlier this year.  Thus, trough this multi-year lens the semiconductors look to be fine.

smh weekly

What’s more concerning to the bull camp here however is the near-term outlook for the group.  After completing a failed higher high in July, the Market Vectors Semiconductor ETF (SMH) trickled lower and last week, much like the broader market snapped below near-term support.  The SMH did however find a resting spot for the weekend at the 100 day simple moving average as well as the defined up-trend line dating back to November 2012.  While in the immediate term an oversold bounce is most certainly possible, any eventual  break below the November 2012up-trend line could quickly bring about a series of new sellers.

The 200 day simple moving average (red line), currently near the $35-50 area is an interesting next reference area on the downside.  On the upside, a push past $38.50 may quickly bring the bulls back from the stable and push the bears away from the table.





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