May 20th, 2011
I could say things are pretty much evolving as expected. The market successfully held the line at the 50-dma, so far, and is now striving to make new highs for the year. I’ve rotated a large chunk of my portfolio into health care related stocks like drugs, biotech, medical supplies and services.
The only thing that seems to be underperforming and even, perhaps, failing right now are some of my techs, especially the semiconductor stocks. Hey, what’s going on there? I took a look at the SMH Semiconductor Industry etf and found what I think might be a possible answer.
Exactly a year ago, based on the SMH chart at the time, you would have said that there’s a good possibility that, as a proxy for the whole group of semiconductor industry stocks, SMH could appreciate 25-30% from the then current level of 27.45 to the 34-36 area. At the time, that projected target level, if SMH actually got there, was the descending upper boundary of a long established channel, assuming good support from a favorable market (click on images to enlarge):
Roll the tape forward, please, and here’s what we see today:
Interesting but … so what? What it means to me is that seeing the TXN, TQNT, TSM and other semiconductor stocks in my portfolio stall out might actually be more a function of where the whole industry is than something going on with the individual stocks. As a group, stocks in the industry are now at that upper boundary resistance.
As bulls and bears struggling it out for control to determine if the semiconductor group can final cross into territory not seen since after the Tech Bubble burst in 2001, the decision every individual investor with a stake in that struggle, like myself, has to make is whether to sell any or all of their semiconductor-related stocks today or should they try to weather out what could be a the long and possibly disappointing struggle of the big boys. Furthermore, how long might this contest take? Weeks? Months? Quarters? And what opportunities, if any, might be lost by having money tied up in semi’s?
The Bulls failed in 2003 and 2007; there’s no guarantee they won’t fail in 2011. I think I’m going to step back a little and watch this from the sidelines.