Breakout in semiconductors just beginning

Arguably semiconductors are one of the most cyclical subsectors.  If we are indeed observing a new shift in to cyclical offensive sectors, semiconductors should lead the way.  And they seem to be doing just that after going nowhere for 19 years.  It looks like we're in the early stages of leaving this 2 decade base and moving toward the 1.618 Fibonacci extension where I expect some consolidation will occur.

This is a very volatile technology subsector and is often difficult to hold.  My favourite ETFs in this space are SMH and XSD.

Nasdaq 10000 by the end of 2020? 2.618 Fibonacci extension target is ~13000

It has been a while folks.  Anyway here goes:

I think the Nasdaq is going to leave the 1.618 extension of its 2000 high behind and head to the next extension level (2.618).  Rounding the 2000 high to 5000 and the 1.618 extension to ~8100 (which we have been trading around since Feb 2018) the 2.618 extension would bring us to approximately 13000.

It took the Nasdaq 18 years to reach the 1.618 extension level.

The 2000 - 2015 Nasdaq base is gigantic.  It's possible that the breakout has just begun.

Where have all of the AAII bulls gone? Europe and emerging markets apparently...

Despite the S&P500 being only 24 points from all time highs, AAII investor bullish sentiment has reached unusually low levels.  Fund flow data indicates that over the past 2 weeks a lot of money has left US equity ETFs and flowed into developed international and emerging market ETFs.  The Fast Pitch blog indicated recently that fund manager US equity allocation is currently at a 9 year low.

From a contrarian perspective one must view this as positive.  With cash balances of the top companies in the S&P500 at record levels, corporate tax reform on the horizon combined with sound corporate and economic fundamentals, it makes sense to be a buyer of US equities.  I think the majority of investors are being distracted by the negative media and the recent Trump political drama.

Nasdaq 2017 = Dow Jones Industrial Average 1950s? Ultra bull market ahead?

Looking back it wasn't surprising that the US stock market would enter a correction at the Nasdaq 5000 range.  This was the previous year 2000 top (~5200).  Breaking through this level required more conviction on behalf of the market as it signified the Nasdaq was finally leaving the dot.com bubble top behind it.  Market watchers have been focusing on Dow 20000 and S&P500 2400 but I think the Nasdaq is the index to watch.

After the 1929 top, the Dow finally reached new ATHs in the early 1950s AFTER which a 18 year bull market followed until concluding in 1968.  The post 2000 Nasdaq has a very similar chart to the post 1929 Dow.  Some differences being that consolidation in the Nasdaq post 2000 was more constructive and shorter in duration than Dow consolidation during the Great Depression.  From absolute top to bottom the Nasdaq corrected less than the Dow and reached new ATHs sooner.  One can suggest that the modern Nasdaq has shown more resilience than the 1930s Dow.  If the Nasdaq follows a similar pattern of Dow 1950 we can expect a long and powerful bull market ahead.

Option Buyer Sentiment Gauge remains at 2009 levels

Option buyer sentiment is at 2009 levels.  Is it too optimistic to expect a rally as significant?

Too late to turn bullish on oil?

Although the media has "turned bullish" on oil, I wonder if this sentiment is a sign of a short term top.  I think the OPEC news is largely irrelevant.  We are awash in oil.  From a technical perspective, both WTI & Brent are approaching short term overhead resistance.

What are the stock charts of Canadian banks saying?

I must admit that I'm worried about the Canadian banks.  Not withstanding all of the risks surrounding the Canadian housing bubble, they're overvalued when compared to their US and especially European counterparts by at least 50%.  P/E and P/B ratios suggest this nearly across the board.  The risks associated with the Canadian real estate market is the single reason why I have no Canadian assets other than my primary residence.  The charts of the Canadian banks are difficult to interpret.  RY & TD are of course the strongest and have held up best over the past 2 years.  But this could be a "flight to supposed safety" as Canadian investors move further into the "safer" banks.  The downtrend the bank charts show doesn't look as severe as the early downtrend prior to the financial crisis but they do illustrate concern among investors.  They continue to post lower lows at a slow grinding pace - 2 years and counting.  Unfortunately, when it comes to downtrends, the most pain is usually felt at the end.  I'm sitting this one out.