What happened to semiconductors?

Discussion in 'Technical Analysis' started by mutluit, Oct 28, 2012.

  1. mutluit


    What happened to semiconductors?
    An interesting correlation reversal has happened!
    Never before seen such a thing - worth studying:
    Anyone with more than a passing interest in the equity market knows that semiconductors have been one group that has historically traded in the same direction as the market. When equities rally, semis typically rally more, and when the S&P 500 declines, semis have a harder fall.

    Over the last six months, however, the typical positive correlation between the S&P 500 and semiconductors has been turned upside down. Over the last six months, the S&P 500 has rallied by about 5%, while the S&P 500 Semiconductor group is down more than 10%. Over that period, the correlation between the daily closing price of each index has dropped all the way down to -0.23. This is well below the historical average of +0.66, and it's a level not seen since May 2006!

    The key question investors are asking after seeing the shift in correlation is whether the decline in semiconductors is a leading indicator for the broader market or simply an anomaly.
    For full article with charts, tickers etc see:

    Here's the chart:
  2. More likely semiconductors have become a "commodity"... where the low-cost producer gets the volume sales but on low margin.

    Companies which live in such an environment have great difficulty in adding genuine value which translates into profits.

    Apple currently has the mobile computing/personal entertainment device market by the gonads. Whenever someone comes around to legitimately challenge Apple's products/prices, Apple's stock will lose its premium and its stock will plunge to "commodity value".