Customer Service 1 (888) 261-2693
Advanced Search

It's Time to Dip Into the Chips

By Jeff Clark
Tuesday, August 15, 2006

Semiconductor stocks look bullish. Well, sort of...
 
For the first time in a very long time, the semiconductor sector is performing better than the overall stock market.
 
In fact, here’s how the “semis” stack up against the major market indices for the past six trading sessions...
 
INDEX
RETURN
Dow Industrials
-1.25%
S&P 500
-0.63%
NASDAQ
-0.77%
Russel 2000
-2.30%
Semi Index
-0.28%
 
I know it’s difficult to get too excited about a sector just because it lost less than the other guys. But the fact that the semi’s held on to most of their gains yesterday while the broad market gave up the lion’s share shouldn’t be overlooked.
 
Fundamentally, the semiconductor stocks are as cheap as they’ve been in years. Take Intel (INTC) for example – the bellwether of the semiconductor industry. At $18 per share, INTC trades at the same price today as it did in 1997.
 
In fact, the sector is so cheap that two of the best value investors I know – Porter Stansberry and Dan Ferris – recently recommended semiconductor stocks for their newsletter subscribers.
 
But it’s the technical picture that has me intrigued...
 
 
You can see how the SOX index dropped over 25% from its May high to its July low. But a few weeks ago, the index broke out of its downward trading channel and has consolidated that move for the past three weeks.
 
It looks like it’s simply a matter of time – and maybe not too much time at that – before the sector starts a new uptrend.
 
The recent relative strength in the sector, the cheap valuations, and now the improving technical picture suggests it’s time to start nibbling on the chip stocks.
 
And if the chip stocks look bullish right now, then it’s hard to be overwhelmingly bearish on the overall stock market.
 
Best Regards & Good Trading,
 
Jeff Clark




Recent Articles
Market Notes
Food and tobacco stocks continue to lead the market… Kraft, General Mills, Kellogg, Altria, Imperial Tobacco at new highs.
 
Earnings today: Applied Materials, Home Depot, Wal-Mart.
 
Condo developer WCI Communities hits another new low.
 
In The News: The unbelievable wages at Goldman Sachs.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%