Momentum Monday – Market of Stocks

The charts on Momentum Monday are powered by MarketSmith

The expected breakout in the small-cap index Russell 2000 hasn’t happened yet. Instead, IWM tested its rising 20-day exponential moving average. If this bull market has more legs, the breakout will eventually happen. It just needs more time.

The biotech sector shined and had one of its strongest weeks this year. Many of the stocks in the sector are extended so chasing them here is not a good idea from a risk-to-reward perspective.

The other leadings sector – semiconductors, is down multiple days in a row. Many of the semis have already given up their earnings gaps: AMAT, QCOM, TER, or are testing their 50-day moving average. NVDA is so far holding the front and showing relative strength by going sideways.

Maybe next week, we see a reversal – biotechs will pull back while semiconductors rally. This type of sector rotation happens all the time in a bull market. Select sectors pull back but the major indexes remain near their 52-week highs.

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