Biotech Leads NASDAQ Lower

Market starts higher and then turns and runs lower as biotech and consumer sectors sell. The NASDAQ suffered at the hands of the biotech stocks early hitting an intraday low of 4190 before closing at 4227, down 50 points on the day. IBB fell 2.7% to lead the downside. Why the selling? Just as many have stated about the market overall… overvalued. This is worth watching to see how investors respond. Do they buyers come back in as they have in the past or does money find a new home?

As my dad was famous for saying to me, ‘indecision is a decision!’ When the market can’t make a decision on direction more times than not, the sellers will step into the void and rattle everyone. Let this all play out. We added some short positions today, but they are only trades on the current activity. Until the trend is broken we keep our stops tight and take what the market gives one day at a time.

Moves worthy of NOTES:

S&P 500 index moved to the 1850 level of support to start the trading day. It did hold and bounced back to close at 1857 or down 0.5% today. 1874 offered resistance on the upside last week and thus, we may be establishing a short term trading range for the index? Healthcare (XLV) was the downside leader giving up 1.1% today. Consumer Services (XLY) & Retail (XRT) were off 1% and Basic Materials (XLB) lost o.75%. None of the ten sectors of the broad index ended the day in the green.

Financials did okay managing to end essentially even on the day. Maybe… just maybe they are wanting to take on that leadership role we discussed last week? Still on my watch and manage list. JP Morgan was up 1.5% despite the negative tone of the markets and adding to the breakout from last week.

Healthcare as we have discussed broke support and the 50 DMA. This is negative for the sector and now we watch to see how the short side of this plays out. Drugs (XPH) were the downside leader dropping 3.3% on the day. The sub-sector needs to hold support at the $92 mark near term.

Global markets (EFA) responded positive on Monday closing higher on the day and bouncing back from the selling last week. Europe (IEV) is a part of the reason, but it failed to move above the 50 DMA today. Watching to see how this all unfolds near term. The emerging markets (EEM) was up 1% on the day and is back to the resistance at $39.50. If we get through this level be patient and manage the entry and stops.

Apple managed to gain 1.3% on a down day as it is rumored they are in talks with Comcast about a streaming television service that would use Apple’s set-top boxes. Worth watching and may be worth owning Apple stock if the deal progresses.

Gold was impressive on the gap lower followed by more selling to drop to support at $126.20. The FOMC meeting and comments did nothing to help the metal. Now we wait to see if it can hold support? Stops have been hit and the downside play may develop if the selling continues.

Large cap stocks AMZN (-2.4%), NFLX (-6.6%) and ALXN (-6.2%) showed the breakdown in investor confidence today. They put pressure on the NASDAQ 100 index and the downside trade is worth our attention as well.

I discussed in the weekly update on Saturday that the lack of clarity remained an issue, and that we would be better off taking a break than fighting the current market movement. The uncertainty is leading to some selling, but the selling is still bringing in buyers. When that merry-go-round stops the market will drop and investors will then decide what valuation works best for the markets looking forward. Practice patience for now and go have some fun versus beating your head against the market.