July 20, 2020 8:00am

As the sector flies too high, the myth of Icarus recurs

Pre-open indications: 0 BUY and 1 SELL

What I provide is an intelligence daily. Where are the canaries in the sector coal mine, am I the only one? 

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Dow futures are DOWN -0.12% (-32 points), S&P futures are DOWN -0.15% (-5 points) and NASDAQ futures are UP +0.22% (+24 points)

 

Stock futures are weak and fluctuating early Monday, about to give back last week’s gains?

European stocks were mixed after European Union leaders meeting at the weekend failed to come to an agreement over a multibillion-euro recovery fund for the region to help it recover from the coronavirus crisis and the pan-European Stoxx 600 recouped its earlier losses to hover just above the flatline by mid-morning;

Asia Pacific stocks were mixed in different countries as the MSCI’s index of Asia-Pacific shares outside Japan edged down -0.09%.

 

Data docket: Traders are eyeing lawmakers beginning negotiations on new stimulus measures.

 

Henry’omics:

Stock futures are slipping …

NOTICE that small-capitalization stocks, like “our” universe considered sensitive to trading <as reflected in the Russell 2000 index (RUT +0.39%)> gained 3.6% last week.

And, the XBI hit a new high of 119.56.

Or is it time for another decrease in stock pricing and the market’s performance that is quickly followed by yet another opposite direction swing?

Key words: support versus resistance!

 

Friday night’s post title - a recap: “market paused as sector remained strong as a haven”

  • The NASDAQ closed UP +29.36 points (+0.28%);
  • The IBB closed up +1.77% and XBI also closed up +2.10%
  • Sector volume was LOW with 5 of the 24-upside having higher than the 3-month average volume and 2 out of the 9-downside having higher than the 3-month average volume;
  • Friday’s percentage (%) of the 24-upside were +0.06% (EDIT) to +9.58% (BLCM) while the 9-downside ranged from -0.06% (VCEL) to -3.83% (PSTI); 

Q3’s last five (5) sessions: pattern or trend?

  • Friday closed positive with 24 advancers, 9 decliners and 2 flats
  • Thursday closed negative with 7 advancers, 25 decliners and 3 flats
  • Wednesday closed positive with 30 advancers, 4 decliners and 1 flat
  • Tuesday closed positive with 25 advancers, 8 decliners and 2 flats
  • Last Monday (7/13) closed negative with 4 advancers, 29 decliners and 2 flats

 

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

Maintaining Sell:

Biostage (BSTG) closed down -$0.05 after Thursday’s +$0.21 after Wednesday’s +$0.01, Tuesday’s -$0.02; serious questions of transparency, ethics, lack of experienced management talent and loss of executive team. BSTG trades ONLY with day traders, NO institutions or major firms. The real issues are the amounts of outstanding private placement shares sold to Chinese nationals with warrant coverage (little is left). After an IND approval, WHY hasn’t a clinical trial begun? – BROKE;

I am betting on a rotation of sector equities, the disparities of closings, the IBB (UP +3.41%) and XBI’s (UP +3.28%) as weekly numbers were up ... I say or project … CAUTION.

 

The BOTTOM LINE: I still haven’t changed my tine, “I am still about trimming RISK; the short-term road is so perilous”.

The conclusion of the week’s highlighted some softness in the latest trend raising questions about whether a rotation is stirring.

The continued rise in COVID-19 cases has prompted a renewal of lockdown restrictions and sentiment is weakening – I DO NOT believe that additional fiscal stimulus from Congress will prop underlining weakness.

  • The U.S. recorded more than 71,558 new coronavirus cases on Saturday, representing the second-highest daily of infections on record, with the U.S. looking at 3.66 million total confirmed cases, amid a resurgence in a number of states (data from Johns Hopkins University);
  • New cases are increasing in nearly all 50 states;
  • 19 states hit their own record highs in average daily new cases;
  • 139,480 deaths from the virus have been reported in the U.S., the most fatalities of any nation in the world.

Optimism has to have many legs and I am NOT sure it will underwrite a reopening of economic realism.

We have to build-in a pessimism factor into our “models” of investing or trading, as to sector and market confidence in the summer months.

Q2 sector results should start appearing in the first week of August …

 

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.