July 15, 2019 8:35am

Last week the IBB dropped -3.45% while the XBI (weekly) floated up and then declined Friday -0.14%

Add in summer doldrums, a past mid-week holiday, July vacations, the lack of volume and complacency along with trading volatility pre up-coming Q2 LPS (loss-per-share) earnings

Answer = lower price targets affecting share pricing depreciations!

Pre-open Indications:  oversold in a traded environment

Investors seem to be happy living in a constructed reality, swallowing the Xanax pill is their prescription, in which directionless momentum is carrying the sector

 

The sector is what it is, until it isn’t and even then it doesn’t seem to be…

 

Dow futures are UP +0.24% (+66 points), S&P futures are UP +0.22% (+7 points) and NASDAQ futures are UP +0.25% (+21 points)

 

U.S. stock index futures were mixed investors pause for breath following a record-setting market performance last week and monitor Chinese economic data.

European stocks erased early gains, amid worries that China’s economy is slowing due to a trade war with the U.S. as the pan-European Stoxx 600 traded 0.3% lower by mid-morning.

Asia pacific markets were mixed, Markets were closed in Japanese holiday; Chinese stocks recovered from an earlier slip to finish the trading day higher following the release of GDP data that showed the Chinese economy growing at its slowest pace in at least 27 years.

 

Data docket: Empire State manufacturing survey is due for publication at 8.30 a.m. ET

 

Henry’omics:

Today’s immediate issue, China’s economic growth slowed to 6.2% in Q2 from a year Q2/18, its weakest pace in at least 27 years, as the trade war took its toll.

The often the politically sensitive healthcare sector has displayed … sensitivity in a variety of exchange-traded funds (ETFs) tracking the sector.

XBI is an equal-weight ETF, whereas the iShares Nasdaq Biotechnology ETF (IBB) is cap weighted. That gives the SPDR S&P Biotech ETF (XBI) a potential performance advantage when smaller biotech stocks are surging, but it also makes the ETF more volatile than its cap-weighted peer. XBI's three-year annualized volatility is nearly 800 basis points higher than that of IBB.

An indication, the IBB was up +19.2% (6/25) and XBI was up 32.9% as of 6/25/19. That compares with a 16.6 % gain for the Health Care Select Sector SPDR (XLV). XLV and rival cap-weighted healthcare ETFs usually devote 20 to 25% of their weights to biotech stocks, meaning that … tactical investors could opt for pure-play exposure to the biotech sector with funds such as IBB or XBI.

Could there be room to run in the short-term or should we weep until September?

Earnings season is headed our way, 8/6 kicks off with Sage Therapeutics (SAGE) followed by Athersys (ATHX) on 8/7, so far.

I am discounting Q2 expectations leaving plenty of room for depreciation!

Volatility has been the sector’s moniker and I would be prepared for anything!

 

From Friday’s post, “the upside and downside pricing was lean. Low volume, continuous volatility even after the fed juiced the markets. In July’s second week, the sector equities slipped in four (4) sessions after markets rose to all-time highs after three negative, one holiday and one positive close.”

  • The NASDAQ was up +48.10 points or +0.59% to 8,244.14
  • The close was negative with an A/DL of 21/22 and 0 flats and 2 acquired;
  • The range of the 21 upside was +0.11% (IONS) to +8.37% (BSTG) while the 22 downside ranged from -0.03% (BOLD) to -10.95% (MESO);
  • 6 out of the 21 upside had higher than the 3 month average volume;
  • 4 out of the 22 downside had higher than the 3 month average volume;
  • The iShares NASDAQ Biotechnology (IBB) indicator: Friday closed down -1.36% after Thursday closed down -1.47%, Wednesday’s -0.28%, Tuesday’s +1.02% and last Monday closed down -1.36%;

Q3/19 so far:

  • There were 2 positive, 1 holiday and 7 negative closes;

 

Companies in my headlights – It’s your decision; I provide an idea and context: 

Oversold, a rebound is due for many yet a few will still hug the bottom

 

 

Opinions expressed are those of the author and are subject to change, and not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

Whether information or intelligence is good, bad or somewhere in between; I put into context what is relevant and useful for investors.  All investments are subject to risks. Investors should consider investment objectives.

Henry McCusker, the editor and publisher of RegMed Investors does not hold or have positions in securities referred to in this publication.