The market-leading and highly cyclical semiconductor sector is turning lower after making a higher high on declining relative strength and momentum. These negative divergences are showing up all over the place on the charts I monitor. Confirming this potential change in trend, data and information service provider IHS Markit this week also lowered its global revenue growth outlook for the chip industry in 2019 to a decline of -7% year/year.
“Revenues will fall to US$446.2 billion in 2019, down from US$482.0 billion in 2018. This represents a major swing in the market outlook compared to the previous forecast in December, which anticipated the market would expand by 2.9% this year.” - IHS Markit.
The chip stocks have traded in an almost irrationally exuberant fashion this year. Reality could be about to set in leading to significantly lower prices in the months ahead.
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