If you are a trader, you surely are starting to feel like the market needs a correction. And almost every single guest on television and every market analyst is in the same camp: They're looking for a correction, but want to buy the dip.
A week or so ago, when I returned from vacation, I noted that we were overbought and I thought we should get a correction in the coming weeks, but that all of a sudden my view was fast becoming consensus. I have no proof other than anecdotal, but it sure feels as though my camp is still pretty crowded.
Then there is the other developing consensus view, one that I touched on last week: energy. All of a sudden everyone is an energy bull. Not just energy, now they love commodities of all sorts, or at least they love commodity stocks. Yet, they also are bullish, because inflation is coming down.
But if you think commodity prices and stocks are rising, then how can you also think inflation is going to keep falling? Yes, I know inflation is based on many things like rent and health care costs and used cars, but I hope you see the incongruity of this, because I sure do.
As long as we're discussing things that are anecdotal, I want to share that each year around this time I go out to my Twitter followers and ask for stock tickers they think I should be hand charting. Now, I already chart all the big cap names, as you can imagine, and many other smaller- and mid-sized stocks, as well. This is the first year I can recall that there were no biotech stocks served up.
Out of the 65 stocks that I don't currently hand chart but were offered up as potential names to me, not one was a biotech. At least Moderna (MRNA) was a familiar name on the list in other years. What does that say about biotech stocks? Not only is there no love for them, I think folks have forgotten they even exist.
If we look at the chart of the exchange-traded fund for biotech stocks (XBI) , we see it has gone nowhere for a year (really longer, more like nearly two years). So I ask you, what if that very short-term uptrend line holds and biotech stocks gain a little traction? Maybe that elongated pattern will develop into a head-and-shoulders bottom.
Sure it's not a clean chart. There is no clear breakout until or unless it gets up over $90-$92 and there is resistance all the way up to there but from a sentiment standpoint, we should be on the alert that there could be improvement in bios now.
