This is the opening segment from the May 15 edition of Notes From the Rabbit Hole, NFTRH 395. I am releasing it for public viewing because it seems, the title’s question has come roaring to the forefront this week. So the information (including the charts) is slightly dated, but becoming intensely relevant as of now.
We anticipated an ‘inflation trade’ or Anti-USD asset market bounce and this has been going on since mid-February. That was when silver wrestled leadership from the first mover, gold (which bottomed in December and turned up in January), and a whole host of other global asset markets began to rise persistently.
It occurs to me that in public writing I tend to bludgeon people with macro fundamentals (like gold vs. positively correlated markets, yield relationships and even confidence in global policy makers), market indicators (VIX, Equity Put/Call, Gold-Silver ratio, Sentiment, Participation, etc.) and other views beneath the surface of things. So much so that I sometimes forget that people might like to see simple nominal charting as a frame of reference.
We update charts like these every week in NFTRH, but I have done relatively few for public review. So here it is, a simple weekly chart update of various markets, with very limited commentary interference from me.
US Stock Market
As you can see, US indexes have so far held critical support. Best projected case would be a bounce to SPX 2000 (+/-). The market continues to roll over on the intermediate trend as of now.
NFTRH 322 covered the usual range of markets, from US to global stocks to precious metals and commodities to currencies and indicators. It also included an extended economic discussion about the realities of the strong US economy and its dangerous underpinnings.
The economic segment began with this look at the Semiconductor Equipment sector, which was our first indicator on economic strength exactly 2 years ago and will be an initial indicator on economic deceleration when the time is right.
Checking the Semiconductor Book-to-Bill ratio (b2b), this all-important forward looker came in pretty decent for November. Per the data we reviewed in an update last week, the bookings, which is the most important component, was pretty good at $1.22 Billion compared to October’s $1.1 Billion.
The graph from SEMI does not include the November data. I added an arrow showing the current level of the b2b.
Our original graph is marked up as well to show the longer trend. There is a spike up happening and this may or may not be related to an overall year-end sales spike in some high end capital equipment that happens like clockwork at the end of each year in Machine Tools (ref. sales graph below). I do not have the level of knowledge about the Semiconductor Equipment industry to speak authoritatively about its more structural capital spending cycles. So this is just a possibility to consider. Continue reading "Semiconductor Equipment Sector Update"→
Now it gets interesting because early in the bailout process the Fed talked about achieving certain employment milestones before hiking interest rates. Here we are at the 10th consecutive month with 200,000+ job gains (321,000 in November) and the jobless rate down to 5.8% and still there is a question on when or whether ZIRP will be withdrawn?
Well I am a visual learner so I for one can never get enough pictures to inform my thinking. Pardon the redundancy in this chart’s frequent appearances in NFTRH…
The rectangular red box is zero interest rate policy (ZIRP), which is 6 years old this month. If we play it straight we would be expected to believe what the mainstream believes, that the “Great Recession” is a thing of the past and that something built of abnormal policy can proceed per normal metrics and assumptions when abnormal policy is removed. I don’t buy it. Continue reading "Economy Post-'Jobs’ Report; Real or Memorex?"→
Since we were the only ones (so far as I could see) even talking about the Semiconductor equipment industry ramp up (and positive implications on US manufacturing) back in early 2013 I think we should continue to tend the sector and finish what we started.
Last month the SOX took a massive dive down to our noted long-term support area in a giant swoosh of hype (coming from the financial media by way of one company’s outlook) and emotion by way of stampeding herds trying to get out at all costs. It was just a setup as the SOX resides at new recovery highs this weekend.
From my days in manufacturing (most of which were spent not directly participating in this sector) I remember the Semiconductor Book-to-Bill ratio (B2B) as a pretty heavily watched indicator among industry types. From Semi.org:
“The SEMI Book-to-Bill Report provides a first look at the book-to-bill ratio for North American Headquartered Semiconductor Equipment Manufacturers. The three-month average global bookings and billings are a strong indicator for trends in the worldwide semiconductor industry. SEMI follows the protocol established by the U.S. Department of Commerce in publishing our figures only on a three-month average basis. We do this in order to smooth out the natural volatility in bookings. This report is distributed monthly approximately three weeks after the close of each month. Categories covered include front-end (wafer processing/mask/reticle/wafer manufacturing/fab facilities) equipment and final manufacturing (assembly/packaging/test) equipment.”