I am not here to promote the merits of Biotech or to claim it is or is not in a bubble. I am just a dumb macro fundamentals and technical guy. As such, I know that the macro has burped up all kinds of cheap, easy money that has flowed into speculative areas like the Biotech sector. There are solid entities in this space, like Gilead for one (ref. April 21 NFTRH+ highlight), which are real companies transforming real qualities of lives, and then there are a lot of hopes, dreams and promotions.
There is also a secular bull market in Biotech vs. the balance of the Tech sector. However, the post-2011 up cycle has now reached levels of leadership (and distance from the EMA 30) that have capped previous expressions of greed and momentum.
But it is not so clear as to just say ‘Bio’s are due for a correction’. Bloomberg is noting that the bears are gathering against the sector (IBB iShares), but the stock market has other leaders with higher measured targets and one of our ongoing scenarios is for a classic manic stock market blow off.
Look, I have been thinking a market correction could start by now and this correction has not yet come about. Most recently, market sentiment took a real lurch toward over bearish and as usual, that proved supportive. Now Bloomberg is highlighting the bubble in Biotech and the sharks are circling.
What’s a poor schlep to do? Keep an open mind and respect the charts. The monthly above shows that Biotech leadership is at a point that has triggered reversals, historically. The daily chart shows the iShares (IBB) above initial support and filling a little gap. Better support exists down to 360 or so. MACD and RSI are each constructive.
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