What do

Sex and the City

and the Philadelphia Semiconductor Index (SOX) have in common?

They both had their wonderful, original programming runs with over-the-top performances and now are only seen in reruns by jaded observers hoping against hope that Samantha will do something more outrageous and

Intel

(INTC) - Get Report

will miraculously extricate itself from its bearish trend.

In a

Nov. 5, 2003, column entitled "Eating Some Semiconductor Crow" and in reports since then, I presented my technical case for why Intel should be reduced/sold, and why I expected more poor performance from the chip sector.

I got lucky on Intel and the semis, and while I'm pretty darn sure that a snapback rally will come, I'm confident that absolute and relative deterioration will continue for semis because, despite poor price performance, my read on sentiment is that investors are still too bullish on the sector. Consider the following:

What's the reward for owning semis? Is it absolute? That can't be: The SOX is down 17.2% on the year. Is it relative? That can't be the case, either, as the SOX is underperforming the

S&P 500

and the

Nasdaq

by a mile. So there's really no reward for owning semis. Not unless people have some bizarre fascination for poor absolute and relative performance.


Source: Natexis Bleichroder
Click for full-size image

Try as I might, I didn't hear any "sell" comments about Intel on Wednesday. I did hear, while watching

CNBC

, that there's "institutional interest in buying on the dip." And I also heard a lot that there has never been a major cycle peak only a year-and-a-half after it started.


Source: Natexis Bleichroder
Click for full-size image

Upon hearing and reading these comments, and in more than a handful of conversations with market contacts, I wondered why virtually nobody figures that it might not be a major semi cycle and what we saw was the bounce of a generation that occurred within a larger bearish cycle. I also wondered why virtually nobody seems to consider that semis are merely stocks that once ruled the market -- like utility, auto or rail stocks once ruled the market -- but aren't going to come back, reassert their former exalted celestial status and save the market.

Further, is there some universal law that says semiconductors must always be among the best-performing groups in the market, especially when the economy is supposed to be strong? I've done a fair amount of market reading over time, and while I've never seen this in any how-to book or get-rich tome, a ton of people still believe this is true. They have to believe it's true because it is the sector most talked about in meetings and in the media.

Sentiment on semis is still too bullish. Combining excessively bullish sentiment with poor absolute and poor relative action usually results in unforgiving downtrends that normally don't end until there is a fundamental give-up. Given how institutions are wedded to the sector, I figure it will take a long time before the bottom is reached. I still think it's a good idea to reduce positions.


Source: Natexis Bleichroder
Click for full-size image

John Roque is the technical analyst at Natexis Bleichroeder, a New York-based investment brokerage firm specializing in Europe and the U.S., and a frequent guest on CNBC. At time of publication, Roque had no position in any of the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. He appreciates your feedback and invites you to send it to

jroque@thestreet.com.