When investors look around the equity landscape, they're placing their hope and faith in semiconductor stocks as a harbinger of what's hopefully going to come of other technology stocks. The chips are up again today, as the

Philadelphia Stock Exchange Semiconductor Index

is gaining 2.7%.

This sector has displayed a good deal of resilience in the face of the crushing losses witnessed across the entire spectrum of stocks in recent weeks. Semiconductor shares have actually been a bright spot at a time when much of the market has been smelling like three-day-old tuna. It has something to do with the fact that this sector, out of the major cyclical growth sectors, was one of the first to drop precipitously last year.

While other technology sectors continue to slide, the semiconductors have arguably gone nowhere since October, and technicians see that as a good sign, despite continued sluggishness in demand, as evidenced by the most recent report on orders vs. shipments for the sector, and recent earnings warnings from various chip makers.

What's happening isn't so much "bottoming" as it is "basing," that is, forming a base where demand for these stocks is established. For the SOX index, that area's been in the 600 to 650 area for the last several months, as it's had a hard time rallying past 750 but has managed to maintain a support level above 515.

Semis Bottoming, Bottoming and Still Bottoming...

Source: BigCharts.com.

Meanwhile, the semiconductor capital equipment book-to-bill ratio for U.S. companies shows that inventories are a continuing drag on the sector, as companies struggle to unload inventory in the face of falling demand. Book-to-bill refers to the level of orders vs. the level of shipments; the higher the figure, the more orders are coming in; the lower the figure, the fewer the orders. A falling number shows that demand is sliding and companies are cutting back on spending.

February's book-to-bill ratio was 0.77, which means shipments exceeded orders by 23%. January's figure was 0.80, and this figure, compiled by

Semiconductor Equipment and Materials International

, was at 1.23 in August, back when demand was strong. Overall orders decreased 4% month-to-month. Orders decreased 22% year over year, accelerating from a 16% decrease last month and a 25% increase in the previous month, according to SEMI.

"If history is an indicator, we are about halfway through the current downturn, and orders should bottom in the September quarter," wrote Merrill Lynch's semiconductor analyst, Brett Hodess, this morning.

The latest bad news to hit the sector was the odd announcement from

Micron Technology

(MU) - Get Report

, a maker of dynamic random access memory, or DRAM, a commodity chip. The company is delaying its earnings release until next Wednesday but did not revise current earnings or revenue estimates. However, it was enough to spook some analysts, who lowered estimates on the chipmaker. Micron, meanwhile, has rallied off this news -- the stock is up nearly $7 over the last two days. It was lately traded at $48.55. In addition, mobile phone and chipmaker



said today it was cutting 4,000 jobs.

The flat performance of the index in recent months is a positive, according to Todd Gold, technical strategist at


. He believes most technology sectors have further to drop, but he said the kind of patterns currently witnessed in the semiconductor index is something that he'd wish on most other sectors -- the clear establishment of investor demand at a particular level.

"The best-case scenario is" that the market sees more technology sectors in a flat range for months, he said. "It's better if we see that type of basing action. The V bottoms are unlikely to hold, as we've seen over the last eight months."

The networking index, for instance, has slid dramatically, but there is no evidence that demand for these stocks is being formed at a particular level. A number of other sectors (and the

S&P 500, in a sense) have chart patterns similar to this; the more charts that start to look like the semiconductors, the better, according to Gold.

Networkers Slip and Slide

Source: BigCharts.com.