The end is not here, but it’s closer

Hello friends. Semiconductors are the new oil, but that's not a good thing. Semiconductors (and subsequently their stocks) have been rapidly rising due to massive global shortages. Like with every trend ever, emotional retail traders tend to assume that it will last for eternity, and rational observers of the market who have been here long enough know that it will in fact not last forever.

"Nothing gold can stay."

Shortages are an issue that markets have the function to resolve, both by crushing demand (Fed is doing this + high prices are also doing the same), and creating new supply faster (semi producers are doing this). Shortages are not usually a persistent problem, they are a temorary hiccup not unlike the 2020 Covid crash was.

Brandon Kulik: To me, if I was writing a headline, I’d say something like, “The end is not here, but it’s closer.” That’s how I’d represent it.

This dude has *decades* of experience in the semi industry. We listen when he talks. We take notes.

The interesting thing about how Kulik worded this, is that the EWT count of the chart tells the EXACT same story. The party isn't quite over yet. But it will be, soon. We are expecting to see a pullback in semis along with the broader market, which will flush out the glut of retail puts and allow for larger players to position themselves for the coming decline.

Another thing to keep an eye on is the average P/E ratio of this sector. Due to the bubble, it has risen to an eye-popping 32.94, which is probably a lot higher than it should be. Assuming we have a recession (81% chance this will happen in Q2 2022), this P/E ratio should compress to more like the 15 to 20X P/E range, which represents substantial downisde in price, not to mention downside in earnings.