Down Came the Rain and Washed the Biotech Out

June 7, 2016

Mish's Daily

By Mish Schneider

mdaily20160608

More from Meow Wolf Santa Fe, NM

Trying to figure out what will rally, what will fail, what will consolidate and what will trail is enough to make it virtually impossible for any virtual girl to keep her virtual head together!

Now of course I use poetic license here to exaggerate. However, the rotation in the Modern Family, is exciting and perplexing all at the same time.

With the Dow approaching 18k and all that implies-terror and disbelief for some, optimism and jubilance for others, we must look to the Family, interest rates, the dollar and commodities.

Last night I wrote that, “while a lagging member of my Modern Family, this year, I now find Big Bro’ Biotech (IBB) more compelling.”

Today, with the declines in Alexion Pharmaceuticals and the major advance in Sarepta Therapeutics, is it any wonder our blue lady looks like she has a migraine?

IBB, the ETF I have ordained as Big Brother, reacted more to the negative than the positive. However, it basically held Monday’s lows, critical daily chart support and if I had to make a guess, provided traders with a good low risk buy opportunity.

Since rising commodity prices in Corn, Wheat, Sugar, Coffee, Cotton and now Oil kept on keeping on, I maintain that scientists are busy at work.

Transportation, our other faltering sib, caught fire today. Clearing major resistance, it needs a second day to prove that today’s move wasn’t as virtual as our blue lady.

Interest Rates declined. So did the US Dollar. Seems traders remain more focused on economic data rather than our world of insects and commodities going from crawling to flying.

Moreover, with the drop in rates and the dollar, our Prodigal Son, Regional Banks (KRE), took a back seat. His sister Semiconductors, on the other hand, rose to levels not seen since a year ago.

I also wrote last night, “The Fed will have to raise rates if commodities continue on its path. Especially if oil runs up beyond what has been a relatively subdued rally thus far.”

Why is our virtual blue lady reaching for her head? To gesture just how long the market we should be? To adjust her hat? Which reminds me. This is probably a good time to think about adjusting your positions accordingly.

S&P 500 (SPY) Closed just below the November 2015 high at 211.66. Let’s call that pivotal for tomorrow.

Russell 2000 (IWM) 118.45 overhead resistance. 115.00 major support

Dow (DIA) 176.85 support, 178 pivotal 180 place to clear

Nasdaq (QQQ) 110.60-111 remains resistance. Has to hold 108

XLF (Financials) 23.50 pivotal. 24.00 next point to clear

KRE (Regional Banks) 42 resistance with 41.00 support

SMH (Semiconductors) I’m back to wishing I had paid more attention to this sector-looks good still

IYT (Transportation) The 50 DMA at 140.60 now needs a second close above

IBB (Biotechnology) If holds 275 could see 290 or higher

XRT (Retail) 41.75 is the support to hold. Resistance up to 44.75. Granny tends to follow Trannies

IYR (Real Estate) Strong but I am not finding compelling

ITB (US Home Construction) Has to close over 28.00, which it nearly did. Looks good