Papale on the $SOX

            My oldest son starts to drive next month.  While I have mixed emotions about him getting older, I am looking forward to him driving.  Of course I want him to be safe and I have the usual parental concerns on that front.  And we have addressed that.  I have installed a crash cage like they have in NASCAR and insist he wear a helmet with microphone connected to me at all times (just kidding).  Here’s how I see things when he starts driving:  Halftime of the game.  Pizza ready.  Me:  “Matt, go pick up the pizza”.  Or how about this:  “Matt, your brother just called.  He needs a ride home.  Go pick him up.  And put some gas in the car on your way back”.  Yep.  Can’t wait.

I don’t pay much attention to technical’s.  No big news there.  But I am aware of a few things.  First, technology is a large force in our economy.  Heck, pretty much everything relies on tech somehow.  And the one thing that is needed to run a lot of the computers and phones and all kinds of other gadgets is the semiconductor.  So it would make sense if demand is strong for say iphones then there is a strong demand for semiconductors.

If manufacturers see continued demand for product they will continue to order the components like semiconductors.  However, if companies begin to see slowing demand for product down the pipeline, they might begin to order less components like the semis.  Because of that relationship, semiconductors are considered a leading indicator of the economy.

The SOX is the semiconductor index.  This index might logically tend to act as a sort of canary in the coal mine of the economy.  If things do start to slow down in the economy, it is likely to show up in the semiconductor companies first. And in the last week or so the SOX has begun to roll over a bit.  Now this may be a blip or something more substantial, no one can know for sure now.  But even if you’re not a market timer, watching the SOX may make some sense.

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