Market Commentary

SMH Forward Returns

Last week the rotation trade took a break. The Citadel bid for Leopold’s Situational Awareness Fund’s public asset book put a floor on the downward price action.

This time may be different, but over the weekend I thought it would be instructive to have a look at historical forward returns after -20% corrections in the semiconductor space.

Forward returns from the -20% crossing point

For each -20% SMH correction (or lower) since 2011, I identify the exact trading day the peak-to-trough drawdown first crossed -20%, then measure the forward price path at 5 trading days (≈1 week), 10 trading days (≈2 weeks), and 21 trading days (≈30 calendar days) from that crossing date.

I separately record how much further SMH fell from the crossing point to its eventual trough, and how many additional trading days that took.

Averages across the 5 completed episodes: