The post Fed market dip has been completely forgotten now as the S&P 500 recovers Wednesday's highs and breadth expands to better than 2 to 1 positive. The worry that maybe the Fed's aggressive dovishness is a warning sign has been shrugged off as market players focus on the power of an endless supply of cheap funds instead.
There is some excellent action in individual names but one sector that is looking extremely good is semiconductors (SMH) . The group has exhibited very good relative strength lately and is strong again today primarily due to a breakout above the 200-day simple moving average by Micron Technology (MU) .
Micron is a classic cyclical stock. Earnings peaked in 2018 with EPS of $11.95 and are supposed to decline to $7.18 this year and $5.88 next year. That slowing earnings growth is reflected in a trailing PE of just 4.
The battle over Micron is the same battle that is taking place in the broader market. Is there an economic slowdown on the horizon that will hurt commodity semiconductor companies like Micron, or will this expansion continue and the cyclical downtrend be shallower than normal?
The semiconductors is often a group that rallies later in the market cycle and some market players see strength in the group as a warning sign. That may give the bears some hope but, at least today, market players are buying the argument that maybe the down cycle won't be so bad. There are some skeptical analysts but the bulls have a good argument and the stock is reacting well.
Micron still faces some technical overhead but the move today suggest that there is the potential for more upside from here. There is some heavy resistance from $45 up to $60 that will be tough to overcome and if the market goes soft this is a sector that is going to be one of the first to feel pressure. But at the moment the momentum looks good, valuation fairly cheap and the potential for more upside favorable. All bets are off if this market breaks the uptrend off the December low.
I'm digging for some new buys as the indices hit intraday highs. It looks like "Don't fight the Fed' is back in play.
Will I Have Enough Money to Retire?
Want to learn about retirement planning from some of the nation's top experts? Join TheStreet's Robert "Mr. Retirement" Powell live in New York on April 6 for our Retirement Strategies Symposium. For a limited time, tickets are available for $99 for this full-day event. Check out the agenda, learn about the speakers and sign up here.