ROTATION OUT OF FORMER LEADERS CONTINUES -- BIOTECHS ARE DAY'S TOP GROUP -- INTERNET AND RETAILERS BREAK 50-DAY AVERAGES
BIOTECHS ARE BOUNCING AGAIN... After pulling back to its 50-day average, the Biotechnology Index (BTK) is bouncing again. So much so that it's the day's top group. Early last week, I showed the BTK breaking through resistance near 540. It's dipped back below that breakout point, which has been disappointing action. That's why it's especially important that the BTK find new support at its 50-day line. Today's top biotech performers are Chiron, DNA, and Genzyme (see Chart 2).
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RETAILERS GETTING MARKED DOWN ... Last week I showed the Retail Holders (RTH) bouncing off their 50-day moving average. Unfortunately, that bounce didn't last long. Chart 3 shows the RTH falling under that important support line today. Two of the biggest retail losers are Home Depot and Target. Both stocks have broken their 50-day lines. Target is tumbling 2.45 points to a two-month low on very heavy volume. That's bad chart action for the stock and for the retail group.
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INTERNET GROUP IS FALLING ... In another sign that money is moving out of last year's leaders, Internet stocks are starting the new year on a bad note. The Internet Holders (HHH) are one of the day's weakest groups and are breaking their 50-day average for the first time in four months. Their relative strength line has broken their five-month up trendline. That's especially bad for the Nasdaq since the Internet group was one of its strongest groups. Two of the biggest stocks in the biotech ETF -- Ebay and Yahoo -- are also breaking down.
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WHERE'S THE MONEY GOING ?... One of our readers asked this question yesterday. It's a fair question, but one that I've been addressing over the last month. During December, I wrote about money starting to flow into more defensive groups like consumer staples and healthcare which were among last year's worst performers. Within healthcare, biotech stocks and selected drug stocks were highlighted. Those groups have continued to hold up relatively well during this week's market selling. Early in the new year, some money is moving out of last year's leaders -- basic materials, gold, energy, REITs, small caps, and technology -- and into last year's laggards -- consumer staples and healthcare. Globally, we're seeing money moving out of last year's leaders like Canada, Latin America, and emerging markets -- into some of last year's laggards like Europe and Japan. That's where some of the money is going. I suspect some of it is also moving into money market funds, which benefit from rising short-term rates.
