One Should Be Long Technology.

The Nasdaq comeback has begun! The new bull market will be led by Semiconductors. Here's why.

The NASDAQ and the PHLX SEMICONDUCTOR SECTOR INDEX (^SOXX) are at 8-10yr lows, which means, according to the current Kondratieff Long Wave Theory, we are smack dab in the middle of a major economic cycle - this one so happens to be the depression(or Winter Cycle) - and that makes sense.

This bears good news and bad news. The good news is we are in the middle of the winter cycle, not the beginning, and the bad news is that we still have around 5-8 more years to go - most cycles last between 14-18yrs, so if we had the beginning of the "Winter Cycle" start in 2000ish, then by 2014 - 2018, you will see the cycle end. This so called "market goes nowhere for awhile" that everyone keeps saying is true, but remember that by 2014-1018, the DJIA, and more notably, the NASDAQ, should be aiming for their old highs - this is based on the fact that the market has been flat for the last 8-10yrs, so in 5-9yrs, the winter cycle will be finishing - gold will be plummeting, oil will become oversupplied, and new technolgies will advance at an ever increasing rate(probably aerospace). After this winter cycle a spring cycle will emerge, which I believe will take the NASDAQ, and Semiconductors on a huge run that I want to ride - and the tickets are sold right here and right now, today.



With that being said, and knowing Commodities have been in a Secular bull during the last 8yrs, we can assume that we are in the middle of the Secular bull for commodities but more importantly at the beginning of a new secular bull for Semiconductors. See chart below.

Commodities make roads and buildings. Chips make everything else.

We can see that the PHLX SEMICONDUCTOR SECTOR INDEX (^SOXX) is showing the best relative strength against its peers on a 3m, 6m and 1yr timeframe - except for a 6m timeframe - the AMEX GOLD BUGS INDEX (^HUI) leads at that time interval. But if you look closer, Semiconductors are even leading the Dow Jones-AIG Commodity Index (^DJC). Gold stocks and Semiconductor related stocks should outperform, near term and long term, and have been outperforming for the last year. The S&P BANKING INDEX has lagged everything.

3 MONTH

6 MONTH

1 YEAR

BREADTH IMPROVES



The number of new stocks hitting new lows continues to show signs of strength. Breadth indicators continue to favor a case for a bottom, albeit a long and uneven trudging of one. The Nasdaq is showing relative strength still - and if you notice, its New High/New Low chart exemplifies what should be happening when a bottom occurs. If you look at the NYSE stats, the data is less defined and unclear - that's why the Nasdaq will outperform near term and long term.





NASDAQ LEADS MAJOR INDEXES

Looking at performance charts: Nasdaq has started to outperformed on a 3m timeframe. This is important since the major part of the crash, and leading up to the 6500 area support is about 3 months - so far, NASDAQ has held up the best.



The major thesis here is that a new secular growth story is emerging. A growth story that will heal all of the cuts, bruises, and breaks that the Nasdaq left us in 2000. One should now be long technology.

STOCKS: MICRON TECHNOLOGY(NYSE: MU) TAIWAN SEMICOND ADS(NYSE: TSM)
TEXAS INSTRUMENTS(NYSE: TXN) STMICROELECTRONICS(NYSE: STM) LSI CORPORATION(NYSE: LSI)MRVL Marvell Technology Group, Ltd.