December 3, 2017
By Mish Schneider
With so much news hitting the market on Friday, I decided to stick to the benign analysis of the final character of my Modern Family I presented on Facebook Live-Biotechnology-IBB!
To read thoughts on the market and analysis, please refer to the ETF section.
He is called the Family’s Big Brother although also known as Big Pharma.
Why do I address him as Big Brother?
IBB has a hand in everything you do!
From headaches to depression to chronic pain to cures for most illnesses-yep-that’s IBB.
IBB is the most highly speculated and volatile sector.
His parents (XRT IWM) and siblings (KRE SMH IYT) may be great at tracking the US economy-YET
IBB plays a big part as well with 97.17% of the ETFs holdings located in the United States.
This year, with the extraordinary bull run in the market, IBB never even got close to making new highs.
First off, on Friday IBB had a 3 to 1 split. That means that the shares prices were cut in thirds. That increases the number of outstanding shares available, but not the value of those shares.
Secondly, we have seen lots of political footballing in this group.
As a result, issues like the opioid crisis, price gouging, Amazon’s discussions of competing by entering the generic drug market-all illustrate how much cash there is on the sidelines, especially in IBB.
Does that mean the market is not as confident as the news will have you believe?
IBB has a huge basket of 160 stocks.
The biggest holdings?
Biogen, Amgen, Gilead, Celgene and Regeneron.
Given the opioid epidemic, let’s not forget the good stuff these drug companies do-like controlling bleeding in hemophiliacs, or helping folks with Multiple Sclerosis, Diabetes, Arthritis-the Flu, Leukemia, Cancer.
And when something like the Zika Virus hits-who you gonna call? Plaguebusters of course!
Technically, IBB is holding the key weekly moving averages and remains in a Bullish phase. On the daily chart, IBB is in a Warning phase.
Perhaps the 3:1 split will encourage speculators to buy against the underlying support between $99 and $101.50.
If those levels break, expect downside pressure. If that level holds and IBB clears 107.50 area, a daily phase change to Bullish could spark fresh interest.
The huge blow-off rally last week that could have led to a strong topping pattern has mixed results by the end of Friday’s session-see below:
S&P 500 (SPY) After a volatile end to the week, this held the 10 DMA and closed within Thursday’s new high range. Not a reversal
Russell 2000 (IWM) Unlike SPY, this could not clear Thursday’s low and could be a reversal in the making. Over 154.55 would negate that.
Dow (DIA) Besides filling in the gap of the second possible runaway gap, this closed barely down. Value investors? Not so fast-growth still reigns
Nasdaq (QQQ) Back over 155.15 on Monday? Like nothing ever happened.
KRE (Regional Banks) This was the sector that had the most chance of looking a confirmed topping pattern. Yet, it turned out it cleared Thursday’s low so still in play.
SMH (Semiconductors) Saved by the tax reform bell and still in a bullish phase
IYT (Transportation) No reversal top here either-now, could rally more
XRT (Retail) I said that this needed to hold 42.65. Friday low, 42.61 close enough.
IYR (Real Estate) Interesting chart and a sector I’ve spoken little about. Through 83 will be compelling
GLD (Gold Trust) 120.40 the 200 DMA support
SLV (Silver) Made a new intraday low and then closed ok but not great. Through 15.63 better.
GDX (Gold Miners) 22.00 support to hold
XME (S&P Metals and Mining) One to watch this week
USO (US Oil Fund) Filled the gap to 11.70-good sign and now can test 12.00
XLE (Sel Energy Spdr Fd) Confirmed bullish phase
XOP (Oil & Gas Exploration) Looks promising if holds 35.00
TAN (Solar Energy) 23.36 the 50-DMA
TLT (iShares 20+ Year Treasuries) Back over the 50-DMA for an unconfirmed bullish phase
VXX (Volatility Index) Awesome daytrade Friday-but closed on the lows as fears subsided
UUP (Dollar Bull) 24.40 resistance 23.98 some support
FXI (China) 45.10 support should hold if good