Market Shrugging off Recent SOX Weakness
By
Rennie on Tuesday, January 19th, 2010 at 1:53 am
With Friday’s selloff, the SOX is off more than 4% vs its ten-day ago close while the S&P is still up over 1% in the same time frame. Is the SOX leading? Or is that not the right question? Let’s review similar occurrences. The table below lists the last thirty separate instances in which the SOX was off 3%+ while the SPX was up 1%+ in a ten-day time frame. First I’ve highlighted the performance of the semiconductor sector over the next week…
SOX Performance when SPX +1%, SOX -3% vs Ten Days Ago
01/15/10… SOX ??? one week later
08/11/09… SOX+0.3% one week later
05/13/09… SOX +8.5% one week later
10/29/08… SOX +4.6% one week later
07/30/08… SOX +3.6% one week later
11/30/07… SOX +3.5% one week later
10/11/07… SOX +2.8% one week later
05/30/07… SOX +0.1% one week later
05/24/07… SOX +2.3% one week later
01/23/07… SOX +1.7% one week later
07/05/06… SOX -3.5% one week later
03/16/06… SOX +0.8% one week later
02/23/06… SOX +4.2% one week later
02/21/06… SOX -0.1% one week later
09/03/04… SOX +9.9% one week later
08/24/04… SOX -2.4% one week later
06/15/04… SOX -1.0% one week later
01/27/04… SOX -1.7% one week later
12/17/03… SOX +4.9% one week later
12/11/03… SOX -0.6% one week later
06/18/03… SOX -6.7% one week later
06/13/03… SOX +2.8% one week later
08/02/02… SOX+4.8% one week later
12/31/01… SOX +11.8% one week later
12/26/01… SOX +13.4% one week later
11/20/01… SOX +3.5% one week later
10/02/01… SOX +13.2% one week later
05/16/01… SOX +2.7% one week later
05/04/01… SOX -3.6% one week later
04/05/01… SOX +14.4% one week later
12/07/00… SOX +4.1% one week later
In 22 out of the last 30 cases, or 73% of the time, the Semiconductor Index was trading at a higher level one week later, significantly greater than the 49% at-any-time odds for a higher SOX close five sessions later in the same time frame. The divergence proved more reliable in terms of calling for strength in the semis rather than the market in general. Here’s the performance of the S&P500 in the week following the same pattern…
SPX Performance when SPX +1%, SOX -3% vs Ten Days Ago
01/15/10… SPX ??? one week later
08/11/09… SPX-0.5% one week later
05/13/09… SPX +2.2% one week later
10/29/08… SPX +2.4% one week later
07/30/08… SPX +0.4% one week later
11/30/07… SPX +1.6% one week later
10/11/07… SPX -0.9% one week later
05/30/07… SPX -0.8% one week later
05/24/07… SPX +1.9% one week later
01/23/07… SPX +0.1% one week later
07/05/06… SPX -1.0% one week later
03/16/06… SPX -0.3% one week later
02/23/06… SPX +0.1% one week later
02/21/06… SPX -0.2% one week later
09/03/04… SPX +1.1% one week later
08/24/04… SPX +0.7% one week later
06/15/04… SPX +0.2% one week later
01/27/04… SPX -0.7% one week later
12/17/03… SPX +1.6% one week later
12/11/03… SPX +1.7% one week later
06/18/03… SPX -3.4% one week later (*)
06/13/03… SPX +0.7% one week later
08/02/02… SPX+5.1% one week later
12/31/01… SPX +1.1% one week later
12/26/01… SPX +1.4% one week later
11/20/01… SPX -1.2% one week later (*)
10/02/01… SPX +0.5% one week later
05/16/01… SPX +0.4% one week later
05/04/01… SPX -1.7% one week later (*)
04/05/01… SPX +2.8% one week later
12/07/00… SPX -0.2% one week later
In each of the last 19 occurrences, and in 27 out of the last 30 cases, the S&P fell less than 1% or closed higher the next week. While not as accurate in terms of calling for higher prices one week later, the divergence has been a good indication of limited downside potential. In only three cases out of thirty, or 10% of the time, was the S&P down over 1% one week later, well below the 28% random chance for a drop of more than 1% over any five-day period. This doesn’t answer the question of whether the semis are leading on a longer time frame, but based on the results above, the key takeaway from an intermediate-term perspective is that the S&P held up relatively well in spite of the SOX weakness. That signals a rotational environment in effect, and sectors that have been hit hardest, like the SOX, are likely to bounce back and keep the market on generally firm footing.
Market Shrugging off Recent SOX Weakness
By Rennie on Tuesday, January 19th, 2010 at 1:53 amWith Friday’s selloff, the SOX is off more than 4% vs its ten-day ago close while the S&P is still up over 1% in the same time frame. Is the SOX leading? Or is that not the right question? Let’s review similar occurrences. The table below lists the last thirty separate instances in which the SOX was off 3%+ while the SPX was up 1%+ in a ten-day time frame. First I’ve highlighted the performance of the semiconductor sector over the next week…
SOX Performance when SPX +1%, SOX -3% vs Ten Days Ago
01/15/10… SOX ??? one week later
08/11/09… SOX+0.3% one week later
05/13/09… SOX +8.5% one week later
10/29/08… SOX +4.6% one week later
07/30/08… SOX +3.6% one week later
11/30/07… SOX +3.5% one week later
10/11/07… SOX +2.8% one week later
05/30/07… SOX +0.1% one week later
05/24/07… SOX +2.3% one week later
01/23/07… SOX +1.7% one week later
07/05/06… SOX -3.5% one week later
03/16/06… SOX +0.8% one week later
02/23/06… SOX +4.2% one week later
02/21/06… SOX -0.1% one week later
09/03/04… SOX +9.9% one week later
08/24/04… SOX -2.4% one week later
06/15/04… SOX -1.0% one week later
01/27/04… SOX -1.7% one week later
12/17/03… SOX +4.9% one week later
12/11/03… SOX -0.6% one week later
06/18/03… SOX -6.7% one week later
06/13/03… SOX +2.8% one week later
08/02/02… SOX+4.8% one week later
12/31/01… SOX +11.8% one week later
12/26/01… SOX +13.4% one week later
11/20/01… SOX +3.5% one week later
10/02/01… SOX +13.2% one week later
05/16/01… SOX +2.7% one week later
05/04/01… SOX -3.6% one week later
04/05/01… SOX +14.4% one week later
12/07/00… SOX +4.1% one week later
In 22 out of the last 30 cases, or 73% of the time, the Semiconductor Index was trading at a higher level one week later, significantly greater than the 49% at-any-time odds for a higher SOX close five sessions later in the same time frame. The divergence proved more reliable in terms of calling for strength in the semis rather than the market in general. Here’s the performance of the S&P500 in the week following the same pattern…
SPX Performance when SPX +1%, SOX -3% vs Ten Days Ago
01/15/10… SPX ??? one week later
08/11/09… SPX-0.5% one week later
05/13/09… SPX +2.2% one week later
10/29/08… SPX +2.4% one week later
07/30/08… SPX +0.4% one week later
11/30/07… SPX +1.6% one week later
10/11/07… SPX -0.9% one week later
05/30/07… SPX -0.8% one week later
05/24/07… SPX +1.9% one week later
01/23/07… SPX +0.1% one week later
07/05/06… SPX -1.0% one week later
03/16/06… SPX -0.3% one week later
02/23/06… SPX +0.1% one week later
02/21/06… SPX -0.2% one week later
09/03/04… SPX +1.1% one week later
08/24/04… SPX +0.7% one week later
06/15/04… SPX +0.2% one week later
01/27/04… SPX -0.7% one week later
12/17/03… SPX +1.6% one week later
12/11/03… SPX +1.7% one week later
06/18/03… SPX -3.4% one week later (*)
06/13/03… SPX +0.7% one week later
08/02/02… SPX+5.1% one week later
12/31/01… SPX +1.1% one week later
12/26/01… SPX +1.4% one week later
11/20/01… SPX -1.2% one week later (*)
10/02/01… SPX +0.5% one week later
05/16/01… SPX +0.4% one week later
05/04/01… SPX -1.7% one week later (*)
04/05/01… SPX +2.8% one week later
12/07/00… SPX -0.2% one week later
In each of the last 19 occurrences, and in 27 out of the last 30 cases, the S&P fell less than 1% or closed higher the next week. While not as accurate in terms of calling for higher prices one week later, the divergence has been a good indication of limited downside potential. In only three cases out of thirty, or 10% of the time, was the S&P down over 1% one week later, well below the 28% random chance for a drop of more than 1% over any five-day period. This doesn’t answer the question of whether the semis are leading on a longer time frame, but based on the results above, the key takeaway from an intermediate-term perspective is that the S&P held up relatively well in spite of the SOX weakness. That signals a rotational environment in effect, and sectors that have been hit hardest, like the SOX, are likely to bounce back and keep the market on generally firm footing.