Semiconductors

The bullet that has been the enemy of the bears for 2009 and the first half 2010 will be their friend.  The earnings that have surpassed analyst estimates and caused a rush into equities are a thing of the past.  Earnings are a reflection of what has happened, not what will.

We've had the inventory up cycle and now its over.  The weakness in the semiconductors are the canary in the coal mine.  Semiconductors are one of the most sensitive sectors to economic cycles.  They made new 52 week lows on the last trip to 1040, which is a negative divergence.  In March 2009, they failed to break the November 2008 lows, a positive divergence supporting the bottom case. 

The upcoming earnings season in October should be a sell catalyst, not a buy catalyst.