Ivanhoff Capital

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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The charts on Momentum Monday are powered by MarketSmith

The small-cap ETF Russell 2000 – IWM is setting up for a potential breakout near 160. There’s a chance it will try to catch up with the large-cap ETFs, SPY and QQQ which have been making new all-time highs for three weeks in a row.

The biotech sector continues to be on fire. For a third Friday in a row, IBB went up more than 1.5%. The smaller-cap biotech ETF, XBI is also setting up for a potential breakout.

Biotech is not the only healthcare sector that has been hot in the market. There are quite a few medical devices stocks that are breaking out or setting up for a potential breakout: ISRG, INSP, GMED, NVCR, etc.

The market continues to show its affinity to semiconductor stocks. Those that crushed estimates this earnings season, gapped to new 52-week highs and followed through higher. Those that missed estimates and initially pulled back have managed to bounce back for the most part.

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The charts on Momentum Monday are powered by MarketSmith

You know it is a bull market when you sell a few positions for decent gains and they keep going higher. The bulls (the optimists) are fully in charge right now. This doesn’t mean that the indexes won’t pull back. They will. It just means that when they will, dip buyers are likely to show up and defend the important technical areas. Look at the price action in the small-cap index Russell 2000 for example. It ran to 160, which has been a notable resistance. It pulled back from there only to find strong support right where it had to: 158. Now it will probably spend some time in a tight range between 157-160 before it is ready for another potential breakout later in the year.

Semiconductors continue to be the obvious price leaders in this tape. SMH will probably try to consolidate in a range while its rising 10 and 20-day moving averages catch up with it. In the meantime, there are still some good long setups in the sector: KEYS, MRVL, OLED, IPHI, TER, AMD, NVDA, etc.

The biotech sector is in a raging mode. For two Fridays in a row we saw some heavy buying in the sector. There are so many breakouts, both in stocks near their 52-week highs and in stocks far from their 52-week highs: MRTX, BGNE, IOVA, NVRO, NVCR, INCY, ALXN, AMGN, etc.

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