Are We Heading for New Record Highs?

October 17, 2019  |  Michael Reilly

If you’re one of those “cup half full” kinda investors, or even if you’re not – here’s something to consider. 

We’re half way through what is long considered the most volatile month of the year – October.

October can trace its rocky reputation to the fact that some of the more notorious market meltdowns have occurred, or at least escalated, during the month of October; including 1978 (-9%), 1987 (-22%), 2008 (-17%), and most recently 2018 (-7%).

Some of the single largest one day market declines have occurred in October, including Black Monday (1987) and Black Tuesday (1929). So it’s safe to say October has earned its reputation. 

But, October is also often referred to as the “bear killer,” as its end ushers in the beginning of the seasonally-strong six months of the year (November-April).

And that has previously offered some meaningful buying opportunities, including in 2011 and 2015, when the S&P 500 rallied over 8% during the month.

So, here we are fast approaching the end of the seasonally weak six months – and beginning the seasonally strong six months – while both the S&P 500 index and the DJIA are flirting with all-time market highs. 

So what’s everyone so pessimistic about? China Trade concerns? Recession? Talk of impeachment? All the above maybe?

Below are the results of last weeks AAII sentiment results. And it indicates we have the fewest bullish investors since 2016!

It’s hard to believe that with market indexes near record highs that we investors are less bullish now than they were last December when markets got crushed!

So here’s my advice to investors, don’t get caught up in all the headlines. Focus on the facts. Actually, focus on price – because price is fact. It will tell you all you need to know about a security you own or are interested in owning… or shorting for that matter. 

Price moves up as a result of demand outstripping available supply and moves down only when sellers overwhelm buyers. 

Take semiconductors for instance. 

Here is a Monthly Chart of the PHLX Semiconductor Index ($SOX) breaking out to new all-time highs:

Demand has taken control of semiconductors. The reasons don’t really matter. What matters is buyers are eager to buy and willing to buy as prices continue to rise.

Here is the semiconductor Fund (SMH) also breaking out of its recent downtrend to new all-time highs:

Semiconductors going up is NOT bearish for stocks. To the contrary, it’s very bullish. And as chip stocks go, so goes Tech. And Technology stocks make up a quarter of the entire S&P 500 index…

And here’s something else that should be of interest to you. Even if you don’t care about Semiconductor indexes or this group of stocks, the sector matters. 

Check out the chart below comparing semiconductors to the Global 100 Index.

Looking back since 2008, semis and the Global 100 – an index consisting of some the worlds most important stocks, have moved in lock step with one another.

These charts look virtually identical. And seeing as semi’s seem to follow the Global 100 and the Global 100 is showing strength, that could signal good things to come for semiconductors.

 Is it possible semi’s turn south from here – sure. It’s possible, but is it likely?

Right now technology is the strongest sector of the 11 broad U.S. sectors we track. And semiconductors – as a subsector of technology is also exhibiting relative strength.

And as long as institutions have an appetite for chip makers, prices can continue to rise.

Below are a few individual names in the semiconductor space that rank high in our matrix and these names may be of interest:


Individual stocks:

AMBA – Ambarella, Inc.

MTSI – MACOM Tech Solutions


LSCC – Lattice Semiconductor Corp


Semiconductor ETF names drawing some buying interest include:

SOXX – iShares PHLX Semiconductor ETF

SMH – VanEck Vectors Semiconductor ETF

XSD – SPDR S&P Semiconductor ETF

PSI – Invesco Dynamic Semiconductor Portfolio


One of the things we do when designing investment models at Rowe Wealth is target stocks and ETFs that show exceptional relative strength, like the ones above. For more information on these models and how they could benefit your portfolio, don’t hesitate to email us at or call 866.711.2836 ext 3.

As always, invest wisely.

Michael Reilly

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