Skip to main content

Despite drop in semiconductors, tech rally still has legs

The Philadelphia Semiconductor Index ($SOX) plunged today. Is this the end for the tech rally?

In the chart below, I compared the Merrill Lynch HOLDRs that are focused on technology. The ETFs and their associated sectors are as follows:

SMH - semiconductors
SWH - software
IAH - hardware
BDH - networking
HHH - Internet
IIH - Internet infrastructure

Tech HOLDRs compared
As can be seen, the Software HOLDR (SMH, black line) is indeed breaking down. Notice, however, that the other ETFs are moving up or at least holding their own. Interestingly, the Internet HOLDR (HHH, light blue line) does show weakness despite all the hoopla over Google and Yahoo's good earnings reports recently. Still, for the most part, the other tech sectors are still showing growth.

Looking closer at the semiconductor sector, we have had some earnings reports that were good, some that were lackluster. Similarly, forward guidance has varied from company to company. Nevertheless, market research companies like iSuppli are predicting 11% growth in the sector in 2008. It could be that investors are over-reacting to a limited set of disappointing results.

In looking at the charts of individual tech sector ETFs, it appears there is still strength in the majority of them. Based on this, I think it is safe to say that the overall technology sector will not follow the semiconductor sector down. Tech will remain an area of strength.

Disclosure: author owns no shares in SMH, SWH, IAH, BDH, HHH, IIH

Comments

Popular posts from this blog

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position. This first post in the series starts at the beginning: getting good investment ideas. Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets. As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professional

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas. Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what