Here is this week’s video
The 4 O’clock Loop became visible this week on my Slay the SPiDeR circle. About 230 more stocks went to sell signals this past week, even while the S&P 500 and the Dow set new highs. Over a dozen sectors moved into the 4 O’clock Loop.
It would not surprise me to see the indexes go a little higher yet, but not that much as the top stocks are getting very near where I expect them to peak.
Meanwhile, the small and mid-tier stocks are seeing sell-offs already. It’s just a matter of a short time till the big names begin to fall. It’s already happening in the top echelons of semiconductors, internets, and a few software names. Nvidia, Apple, Amazon and Lam Research come to mind to me as leaders getting hit, even after producing very good earnings and revenue growth.
These are the types of markets that give investors fits because the top firms are producing excellent revenues and earnings, yet the stocks are either going nowhere or down for “no apparent reason”.
Did you notice where the arrow is on the psychological states on the circle? It’s smack dab on “FEAR” and rightfully so. If a great company is outperforming on revenues and earnings and the stock is declining, what are the odds for the 2nd-tier companies and 3rd-tier companies? Not good at all, and investors are sensing that.
It takes time for it to sink in to the millions of investors out there. It’s a really slow process.
THE GLOBAL SEMICONDUCTOR SHORTAGE
This global semiconductor shortage which is causing auto plants to eliminate shifts and shut down auto plants temporarily is really going to be a mess for anyone to figure out. I worked in the computer manufacturing industry for a number of years before becoming a financial advisor. I know a fair amount about how it works.
There are a large variety of types of semiconductors. CPUs, static memory, dynamic memory, Programmable Logic Arrays, analog devices, capacitors, diodes, etc., etc. They are combined in various ways to produce final products. So if just 1 type of semi is not available, it destroys the demand side for all the others at the same time. Then you end up with massive supply of some chips at the same time you have shortages of others.
So while it might seem that a shortage would cause prices to rise substantially, it’s only for the chips that are in the shortage situation. The other types will have pressure to lower prices to move inventory. And given the volume of products that today use digital semi’s, it is going to have far reaching impacts globally touching nearly every industry out there.
Also, they can’t just go set up another production line for whatever shortage exists. It is a long lead time to set up a new production line, or modify an existing one to produce a different semiconductor product. This shortage is going to mess up a lot of production schedules globally, and mess with a lot of companies revenues and earnings over the next couple of quarters. Or years.
Let’s Go Get the Money
or at least keep what we already have.
JimB