Stocks are seeking their daily cycle low.
The S & P formed a swing low
The Dow formed a swing low
The Nasdaq formed a swing low and closed above the 10 day MA.
The Banks have yet to form swing low
The Semi’s have yet to form swing low
Not only did Biotech form a swing low, they closed for a 2.5% gain on Friday.
With Biotech breaking out of a multi year consolidation they are indicating a readiness for assuming market leadership.
Back in April of 2019 we looked at the Semiconductors and noticed that they were breaking out from a 20 year consolidation.
Back April of 2019 the Semi’s were just emerging from an intermediate cycle low (ICL). They tacked on close to 300 points before declining into what turned out to be a 4 year cycle low. Now that they printed their 4 year low, the Semi’s are ready to keep going higher.
Back in June we looked at the Semi Conductors
We discussed how the Semi’s were poised to begin the next leg up in their bull market.
Tonight we can see that the train is leaving the station.
The question that I would ask myself if I did not have a position is:
“After a 17 year consolidation what’s more important? A perfect entry or just getting on board?”
Earlier this month we took a look at the semiconductors. We looked at how the semiconductors went through a 17 year consolidation from the 2000 high until regaining that high in 2017.
And since emerging from the 2009 Financial Crisis low, the semi’s have been one of the market leaders.
After breaking out to new highs in 2017 the semi’s backtested the 2017 breakout as stocks dipped into their 4 year cycle low back in December, 2018. The initial thrust out of the 4 year cycle low saw the semiconductors breakout above resistance.
The decline into the early June DCL caused the semiconductors to dip below the recent resistance level, creating a bear trap. Today’s update shows that the semi’s are delivering bullish follow through to breaking above the 1400 resistance level to begin its next leg up.
Stocks broke out to a new daily cycle high on Monday.
Monday was day 20 for the daily equity cycle. A new high on day 20, or later, starts to shift the odds towards a right translated daily cycle formation.
While stocks are forming a higher daily cycle high, the market leaders are breaking out to new all time highs.
Both the Semi’s and the Nasdaq have right translated daily cycle formations that are breaking out to all time highs. Both both are in a daily uptrend. They will continue in their daily uptrends unless they close below the lower daily cycle band.
On Monday we discussed how stocks are rallying out of a half cycle low and following the market leaders higher. The Semi’s provided more leadership on Thursday.
The Semi’s have fully recovered from their dip into their half cycle low. On Thursday, the Semi’s began a breakout from their all time highs.
The Advance/Decline Line has also broke out to a new daily cycle high.
And these are bullish signals for the general market.
Thursday was day 18 for the daily equity cycle. Stocks closed above the 10 day MA and tested the 50 day MA. We should see stocks follow the semi’s higher. A break above the day 11 high of 2789.15 would form a higher high and assure us of a right translated daily cycle formation.
Monday stocks delivered follow through Friday’s bullish reversal.
Monday was day 15 for the daily equity cycle. Stocks formed a swing low and regained the 10 day MA to signal that stocks have formed a half cycle low. A close above the 50 day MA will confirm the half cycle low. And a close back above the upper daily cycle band will resume the daily uptrend.
So while stocks appeared to have formed their half cycle low other sectors continue to show their leadership
The Nasdaq held above the 50 day MA on Friday. On Monday, the Nasdaq closed back above the upper daily cycle band to resume its daily uptrend.
The Semi’s also closed back above the upper daily cycle band to resume their daily uptrend. And they are closing in on its all time highs.
And with these 2 sectors providing leadership, the rest of the market is bound to follow.
Stocks printed their lowest point on Wednesday, following the day 54 peak. At 60 days, that placed stocks in their timing band for a daily cycle low. While stocks did form a swing low on Thursday, the 701 million selling on strength had us skeptical if a daily cycle low formed.
Stocks dropped on Friday to back tested the declining trend line. Stocks recovered on Monday. While they did not close back above the 10 day MA, stocks continue to develop bullishly. They are close to delivering a TSI bullish zero line crossover, which would provide more evidence that day 60 hosted the DCL.
The Advance-Decline did regain its 10 day MA. There is also a bullish divergence developing on the AD Line and they are leading stocks higher.
And the Semi’s have printed a new high. The Semi’s have been leading stocks and now that they have printed a new high, stocks likely to follow.