In a post yesterday, we noted that the relative strength of semiconductors versus energy had finally eclipsed its record high from the dot-com boom in March 2000. Semis have not only exhibited relative strength versus the energy sector; they’ve demonstrated strength versus the broader market as well. Take the relative strength of the Philadelphia Semiconductor Index (SOX) versus the S&P 500. In the early stages of the market decline from the February highs, semiconductors saw a sharp drop in their relative strength, but in late March, the SOX surged relative to the broader market and actually hit a record high on March 24th. With Technology playing an increased role in the stay-at-home and work-from-home economy, it makes sense that semis would hold up relatively well.
From that high on 3/24, we saw a modest pullback in the strength of the semis relative to the S&P 500, which then bounced again in recent days. Going forward, the key for the semis is over which level it breaks first. Will it be the March high or the short-term low three days later on 3/27 that followed. Whichever way it breaks will likely dictate which way the broader market goes as well.