So, what about these charts? We have an interesting divergence working. The Nasdaq hit a new high after the Fed while the Dow and S&P 500 did not. The Nasdaq made a new high by 82 cents. But as you can see, the SPX is responding to 620 hours of this move off the November low. This is also the 89-90-day window off that November low and it’s on the front end of the seasonal change point. It’s very possible a change has already started. If the stock market does not correct given these important cycle points clustered with the Investors Intelligence report we are really dealing with a runaway train.
Getting to the sectors, transports tried to bounce but was repelled by the end of the week. Crude oil stocks were better but we may have sprung a new leak. When I heard Trump talking about leveling the playing field for drug prices I initially thought the pharmaceuticals would get hit but that’s not what happened. Instead it was biotech companies who do the research on the front end and get paid on the back end.
Names like BIIB Biogen got crushed. Even AMGN got crushed. If transports remains in trouble, oil stocks questionable and biotech joins that list, it might be a problem. Biotech is the heart of the market. That’s the area people love to speculate and as fueled most of the fun on Wall Street since the 90s. Take away rampant bullish speculation and the bull loses its heart if not its soul. It’s possible we could add banks to the list because on Friday the BKX took out the low from Feb. 24. Banks have been stair-stepping lower the entire month, since March 1. If we’ve lost transports, biotech and the banks and they stay down, it’s just a matter of time before the rest join in.