July 31, 2017
By Mish Schneider
Anointed “Big Brother,” IBB is a great way to assess if, how and where money flows into the market.
Big Brother has many functions in the United States.
He represents the pharmaceutical companies because of the power they have over us as consumers.
Our current health and future well-being rely on Big Pharma.
Big Brother wields power in Washington D.C. as well.
All the IBB holdings appear in NASDAQ.
Leading medical research requires speculative funds, and if speculative funds are coming into the market, that helps round out the Family.
IBB serves as a lead indicator of how much speculative money is flowing into the overall market.
The more optimistic investors feel in general, the more they are willing to speculate in Biotechnology.
The more they speculate, the better the outcome.
If Big Brother is happy, that happiness becomes contagious. We typically see that spread to the rest of the Modern Family.
How happy is IBB now and will happiness/sedation spread to his languishing Family?
First, a weekly chart of IBB.
Each bar represents one full week. The dotted line is the 50-week moving average. The thinner solid line, the 200-week MA.
The dark black parallel lines show a channel.
What is a price channel?
A price channel is a continuation pattern that slopes up or down and is bound by an upper and lower trend line. The upper trend line marks resistance and the lower trend line marks support.
Price channels with negative slopes (down) are considered bearish and those with positive slopes (up) bullish.
Using that logic, the slope is up. Therefore, should IBB clear the top of the channel or around 329-330 that is positive and could yield a much bigger rally.
A break to the downside (under 260) would be considered a major failure on two counts.
The weekly phase would turn bearish and the support from 2016 would fail.
If speculators sell or disappear from IBB, that will not bode well. That should affirm the already few warning signs that popped up last week.
Transportation (IYT) had a channel failure for the month and went into a Warning Phase.
The Russell 2000 could not end July over its monthly channel top or 142.90.
Regional Banks (KRE) uncertain about the Fed’s next move on rates, could still turn out a bright spot should it hold over 54.25.
Semiconductors (SMH), a leader earlier this year, now looks vulnerable.
Granny Retail (XRT) can go either way after already having a rough year.
In IBB, the top of the weekly channel is proving out as resistance. For the near-term 308.49 is pivotal support.
Should, given the tentative outlook of the rest of the Modern Family, specs flee from Big Brother, expect the market to enter a much more sedate August.
S&P 500 (SPY) 248-245.68 range to break one way or another
Russell 2000 (IWM) 142.90 big resistance now. Under 140 could see 134
Dow (DIA) Amazingly, another new all-time highs
Nasdaq (QQQ) 140.80 support and must get back over 144
KRE (Regional Banks) Unconfirmed bullish phase. 54.25 pivotal
SMH (Semiconductors) 88.00 resistance to clear. 85.40 the 50-DMA
IYT (Transportation) 164 the 200 DMA. If can clear 166.62 some relief possible
IBB (Biotechnology) 2 inside days-that makes this a great place to watch for Tuesday.
XRT (Retail) 40.44 support and if holds 41 could see 43.00
IYR (Real Estate) If closes over 81.00 looks pretty good
GLD (Gold Trust) Inside day above 120-more psychological support
SLV (Silver) 15.25 support. Over 16 looks good
GDX (Gold Miners) Through 23.06 looks good
XME (S&P Metals and Mining) Inside day under the 10 DMA
USO (US Oil Fund) 10.00 pivotal. 10.60 big resistance to clear
XLE (Sel Energy Spdr Fd) Like better over 67.25
TAN (Solar Energy) 21.65 pivotal
TLT (iShares 20+ Year Treasuries) Below 122.80 would be indication of higher rates to come. 124 resistance
UUP (Dollar Bull) Broke the 200-week moving average-sign of more weakness expected as we saw today
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