BIOTECHS LEAD HEALTHCARE HIGHER -- BOTH ETFS APPEAR TO BE BOTTOMING -- BIOTECH LEADERS ARE REGENERON, ILLUMINA, AND AMGEN -- NASDAQ COMPOSITE IS TRADING ABOVE 200-DAY LINE -- S&P 600 SMALL CAP INDEX IS TESTING RESISTANCE LINE
BIOTECHS LEAD HEALTHCARE HIGHER... Last Friday's message showed that healthcare was the year's weakest sector, and most of that was because of a very weak biotech group. [It also mentioned that biotechs were holding back the QQQ. More on that later]. For the first time in awhile, healthcare is the day's strongest sector, and biotechs are the main reason why. Chart 1 shows the Health Care Sector SPDR (XLV) trading just shy of a nearly three month high. It recently cleared its 50-day average (blue line) and may be ready for a run at its 200-day average (red line). The XLV/SPX ratio (top of chart) is starting to stabilize after falling for the last two months. Three of the top gainers in the XLV are biotechs (more on those shortly). Chart 2 shows Biotech iShares (IBB) trading above its 50-day average for the first time in three months and close to a two-month high. Its 14-day RSI line (top of chart) has climbed above 50 for the first time this year. And its daily MACD lines (below chart) are at a three-month high. All of which suggest bottoming action.
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Chart 1
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Chart 2
BIOTECH LEADERS INCLUDE REGENERON, ILLUMINA, AND AMGEN... Regeneron Pharmaceutials (REGN) isn't just the day's strongest healthcare stock. It's also the biggest percentage gainer in the S&P 500. Chart 3 shows the biotech leader jumping 13% today in heavy trading. It has also cleared its 50-day average for the first time since late December. Another biotech leader is Illumina (ILMN). Chart 4 shows that stock trading at a new two-month high and above its 50-day line. The stock's rally off a February low represented a successful test of its October low. That's usually a prelude to a market bottom. The stock appears headed toward a test of its 200-day line. Those two stocks are among the biggest in the Biotech iShares. Amgen (AMGN) is the second biggest holding in the IBB. And it's looking a lot better. Chart 5 shows Amgen (AMGN) reaching a two month high and trading just above its 200-day average. The fact that Amgen formed two "rising bottoms" between September and March increases the odds for higher prices. [Gilead Sciences, which I featured last Friday, is nearing a two-month high].
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Chart 3
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Chart 4
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Chart 5
BIOTECHS BOOST NASDAQ MARKET... Last Friday's message showed that biotechs had been the biggest drag on the Nasdaq 100 as the QQQ was challenging its 200-day average. I showed the QQQ clearing its 200-day line on Tuesday. Chart 6 shows the Nasdaq Composite Index trying to do the same today. That would make it the last of the major stock indexes to clear that resistance barrier. REGN and ILMN are the two biggest percentage gainers in the QQQ. Chart 7 shows the Technology SPDR (XLK) reaching a new high. That's also helping to lift the Nasdaq market.
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Chart 6
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Chart 7
S&P 600 SMALL CAP INDEX TESTS RESISTANCE LINE... The final chart from last Friday showed the S&P 600 Small Cap Index ($SML) trying to clear its 200-day average. Chart 8 shows it doing that over the past week. It also shows, however, that the SML is testing a falling trendline drawn over its June/December highs. The SML/SPX ratio (top of chart) shows that small caps have been gaining on large caps since February, but is also testing the same falling trendline. A close above those trendlines would give a big boost to small caps, and broaden out the market rally.
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Chart 8
DOW AND S&P 500 NEAR FOURTH QUARTER HIGHS... Chart 9 shows the Dow Industrials moving closer to a test of its fourth quarter highs near 18000. Given the steepness of the recent rally, it might run into some resistance there. But its trend is still higher. Chart 10 shows the S&P 500 moving closer to a resistance line drawn over its May/November highs. It may meet some resistance there as well. But it's trend is also higher. Earlier in the week, I showed the NYSE Advance-Decline line testing its 2015 high. I also suggested that a major drop in stock prices was highly unlikely with market breadth figures in such a strong position. That doesn't rule out a market pullback from overhead resistance. But any pullback should be viewed as part of a larger uptrend. Moving average support for the large cap indexes is likely near their 200-day averages.
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Chart 9
