The fascinating part of the market right now is that biotech stocks bounced.
Last week I indicated that the new low list for Nasdaq was littered with biotech stocks and if we wanted the new lows to contract, we would have to see the selling in biotech dry up. Last Tuesday was the peak reading for new lows for Nasdaq at 340. Wednesday saw 164 new lows, Thursday saw 292, and Friday had 264. Sure, those are still big numbers, but none exceeded Tuesday's very large reading.
At the time, I showed the chart of the SPDR S&P Biotech exchange-traded fund (XBI) . I do not claim to know all the ins and outs of biotech, but I do know that while IBB (IBB) , another big biotech ETF, was nowhere near its recent lows and was in fact closer to the highs, XBI was down and out and threatening to make a new low. I indicated that if XBI could hold and turn, we should begin to see new lows contract. That is exactly what happened.
So why do I find it so fascinating? Because a week ago the complaints about biotech names getting sold were all I heard. Now XBI has rallied 7% in two days and there is nary a mention of biotechs. I like it when a down-and-out group rallies and no one seems to notice. XBI has some resistance at $130, as you can see. I am inclined to think after a pause, there we should see it head toward $140 over the next few months.
Then there are the utes. I know, no one cares about the utilities, but last week I indicated that the Utilities Select Sector SPDR ETF (XLU) had a target in this $70 area, and I thought it was time for iy to take a back seat. Despite bonds being flat as a pancake on Monday, the utes had their worst day in a month. Notice that all it did was give back Friday's rally, but I think this bear's watching, because we have a highly speculative group (biotech) vs. a staid, defensive group -- and the two moved in opposite directions on Monday.
Statistically there wasn't much else of note except that upside volume as a percentage of total volume on Nasdaq was at 86%, something we haven't seen since mid-May. That, too, can be an important change, because when the mega-cap tech stocks get all the love, there is simply not enough love for upside volume to be that high. When stocks outside of mega-cap tech get love, upside volume increases.
Speaking of mega-cap tech, I should point out that the Daily Sentiment Index (DSI) for Nasdaq is back at 90, so once again it needs a reset. If mega-cap tech can back off, then it can take the indexes down, too, and get that DSI down.
And if folks are willing to go out on the risk curve (see biotechs vs. utes) then maybe they also move away from mega cap tech.