Tuesday, January 5, 2010

Watching the leaders for "The Shift"

I first wrote about the coming secular bull market in the semiconductor space in the 2008 article THE OTHER COMMODITY. In it was the first pitch on the idea that a secular shift was occurring in the Semiconductor space, and more specifically the Philadelphia semiconductor index (^SOXX).

Well, almost 2 years have passed since that article and we are still showing signs that this huge turn could be manifesting, although the first purge may be coming to an end.

In this article I will demonstrate that the current bull move for the Philadelphia Semiconductor Index could be coming to a end and a medium-term corrective trend could begin - meaning we could see a 6-9m downward consolidation phase.

Is the bull alive and well in Semi land? - Yes, by all means this is just the first pitstop where one should protect profits, scale back, and even use this current move to add to the strategy of long late cycles, like energy and gold, and short early cycles such as Semi's.

Here are a few charts to contemplate this theory that we may get a 15-25% correction in Semi stocks soon.

Semi Index hit my resistance zone and is showing what could be a Long Term WAVE 1 completion, with a corrective WAVE 2 coming, of ELLIOT WAVE THEORY.

I like MU as the best overall technical play. I posted about the CHANNEL BREAK below which showed the reversal of that trend.

But things are shifting, and I am now looking what could be the completing of a WAVE 5 count. This coincides with the Semi Index completing the WAVE 1 of the index above.

In essence, the current move off the bottom could be coming to completion. At what price this happens is still up in the air as these type of capitulation things can go farther, faster than you think, but over the next 6-9months, prices will be at best flat in this space, and probably experience a 15-25% correction.

This would bode well for a short early cycle/long late cycle risk adjusted strategy. This by no means means the end of the secular trend is over, but rather if you want to try and time the market, this is a place to try.

Always enter at your own risk, but with MU up almost 250%, I'll take those chances.

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