SEMICONDUCTOR STOCKS ARE ON SALE

From a “relative value” perspective, semiconductor chip stocks are as cheap right now as they have been in two years compared to the S&P 500.

Today’s chart compares the action in the Market Vectors Semiconductor Fund (SMH) to the action in the S&P 500.

A rising chart indicates semiconductor stocks are outperforming the broad stock market.

[ad#Google Adsense 336×280-IA]A falling chart shows the opposite condition.

The last time chip stocks got this cheap was in September 2010.

The sector rallied 50% over the following four months.

That doubled the performance of the S&P 500 during the same period.

Yesterday, I told readers the stock market should cap off a strong 2012 with a year-end rally.

In that case, semiconductor stocks need to play catch-up. And given how oversold the sector is relative to the broad stock market, that game should start soon.

— Jeff Clark

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Source: Market Notes