Friday, January 20, 2006

A Faint Echo

A Faint Echo That echo I am hearing is the winter months of '04. This was definitely an earnings, news, and data week that set the table for the rest of the year. There was nothing really surprising on the business front. And that includes the news involved with the semiconductor and semiconductor capital equipment companies. Early in the week I e-mailed my friends a list of things I'm monitoring this year. The list is relatively long and the subject matter is wide ranging. Advanced semiconductor fabrication, nanotechnology, all the way to the evolution of Municipalities considering WiFi networks. On Top of that list: Forecasting. Forecasting the growth rate of the semiconductor and semiconductor equipment business and the action in the stocks. It's 12:52CST here right now. As I write this the Dow is down more than 155 points and the Philadelphia Semiconductor Index (SOX) is down about 3.5%. Yes, it is options expiration day and weird things happen but those drops are fairly sizeable. Didn't the market hear all the good news this week? Had to. Then there's the echo.... The echo tells us to go look at some earnings reports for semiconductor and semiconductor equipment companies in January '04. Hmm.... Outlooks and orders were moving in the same direction they are today. Certainly there are a few differences but none profound enough to scrap the comparison. Second, and very much related to the action in today's market, look at a chart of the SOX and some of the big name chip players during the winter of '04. Ahem... Are we peaking? Has the market priced all this in? What's going to move the group higher? Would it take another +25% jump in business activity, like what happened at Lam Research, to keep things moving up? Is it time to call a top? The action in the market certainly has me thinking.

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