Healthcare is the worst performing sector on the session, currently trading about one and a quarter percent lower. The bulk of the selling is taking place in the home health care industry with hospitals not far behind, but we all know which industry is really to blame here, yes? Investors are being spooked out of those bastard biotech stocks.
The industry, as tracked by IBB, is heading into the close near the low of the week. Despite shrugging off weakness Monday, it appears the polytetrafluoroethylene (Teflon) surface of this cancerous industry is wearing off.
The hubris level peaked this week, prepare to see all the weak hands flushed down the shitter and back to their home—living with the penguin.
Guess what? This Friday is the 13th (extra Hitchcock) and the grim reaper will be out for biotech bull blood.
The bloated healthcare sector is leading to the downside here. Their unicorn, the biotech industry is standing broadside in an open field, and I am perched 30 feet up with a sniper rifle ready to put fifty calibers in its chest.
I woke up rested, had a proper breakfast, saw to my morning preparations, lit my ritualistic death to biotech candle, but still managed to make some errors during the session.
Sometimes you do everything right but still make mistakes—for now I am still human. A few things tripped me up:
Gaps into a new week often get faded
TRIN had abnormal readings which call the first move of the day into question.
The problem with the above two events is they have no data behind them. I never ran a study to quantify the validity of these observations. Slippery footing gives way fast when you get out of sync with the market flow.
As a result, despite coming into the week with a short bias, I was trying to fade the market by 11am. Try is the key word because it felt forced. I managed to escape break even the first time but the second fade try took a drop dead stop—something I have not done in over a month.
Meanwhile, biotech was bulletproof. The industry even shrugged off another Citron attack. I am still short via BIS, but I feel like I am standing blindfolded in front of a firing squad.
When the market gives me a good spine twist I like to make sure my mental game is still centered. I am off to find my inner voice and listen to it until it stops talking o_0
I am also looking forward to hearing The Option Addict run through the investor conference content again. Expert commentary is always useful when assessing your own strategy and approach.
Until the conditions can improve underneath the surface of index prices, the model is going to keep generating a short bias.
This is the fourth consecutive week where the bias model is calling for the short. Unbelievable, that’s pretty much the entire month of October. The NASDAQ composite is up 6.88% over the period, it’s best run of the year, and the model is flat out on the wrong side of the tape.
It makes me have a few thoughts—the first is that we are undergoing a shift in the marketplace which is causing my spread to stay pinned to the high side. The second thought is only a few stocks are doing the lifting which is pressuring the hybrid score.
Nevertheless, I would be remiss to ignore the bias. I will be working the short side of the tape this week. I may even initiate BIS again as I eagerly await the ultimate biotech comeuppance—an event so horrific and gruesome that minces biotech investors into little cubes of meat to be served on skewers.
Thanks again to everyone who made it out to NYC this weekend. I had a blast catching up with you guys–especially the trading conversations. A sincere hat tip to you.
This is my first time in the city during the fall. Back home this is my favorite time of year, a seasonal crescendo featuring harvests and natural colors. Here in the city it means a cool clime and hopefully lots of mysterious looking goons and goblins.
I already witnessed a women on the subway with demonic eyeballs. Hopefully an effect achieved through theatric contact lense, but how can I be sure? Night comes earlier here not only because of the towering cityscape but also because it’s a few 100 miles deeper into the eastern time zone. Hopefully its arrival brings forth the real freaks.
It certainly smells better today then the thick summer air.
Overall the mood is positive. I made it to the (undisclosed location) from the Laguardia flea marketfor about $3 via bus and rail. I’m excited to see the crew and all the conference attendees tomorrow. But tonight I see the city. Shoot me at DM @imdexmodel if you’ll be around the East Villiage tonight. Something tells me I’ll end up there.
As for the markets: had I not held on to on some high risk weekly LNKD calls while flying east The market would have blown my head off because both LULU and FEYE were DECIMATED. What a cruel rally.
These are battles I will resume next week after Option Addict and the finance triumvirate meet in the war room and hash out a year end plan.
My book is undergoing a blitzkrieg this morning after my largest investment, Twitter, was downgraded by Morgan Stanley. Issuing the decree was a man by the name of Brian Nowak who sees fit to single handedly take on Steve Ballmer and Prince Alwaleed in the high stakes game of valuing a social media company.
Nowak spouted off big words about mobile advertising. He obfuscated the matter with acronyms. He sounded, for all intents and purposes, really fancy and better than us.
With Twitter scheduled to report earnings October 27th it won’t be long until we can see if he is right.
Twitter has been a problem child all year. There were management issues, for a while they had no CEO, and the platform is criticized for being too esoteric for the common plebeian to use. I know, eventually, it will see adoption, but then again I am optimist who thinks highly of his fellow citizen.
I am still watching Facebook today. If that stock starts moving fast to the downside my concern levels will elevate rather quickly. In the meantime I got back into BISe early on for the #TeamHillary trade.
Final note, I think Brian is the most reprehensible name in the English catalog. It looks like brain and I’d like to punch it with my fist like a cave man.
Nothing moves a stock quite like a rumor, especially a believable one.
The reason an Apple for GoPro rumor is so compelling is because it makes sense. Apple has more dollars (doll hairs) on their books then most developing nations combined. They also recently bought Beats by Dre—another piece of ‘wearable’ technology.
The valuation Apple gave Beats was the basis of my successful GoPro swing trade when it IPO’d. Simple napkin math puts the value of GPRO stock at $72. I think GoPro investors (bag holders) would be happy with a $59.95 buyout at this point. I would too.
GPRO is the lagging anchor on an otherwise dominant GARP portfolio since the June adjustment. It can propel the passive growth portfolio to greatness. TBD.
We are currently priced for a gap up in the NASDAQ futures after an overnight session that featured normal volume. The range was also normal. It started by holding the Wednesday low then a rally up through the entire range resulted in a test above the high, briefly, before price settled back into it. At 8:30am Initial/Continuing jobless claims data was better than expected. We also had CPI data out better than expected—the initial reaction is selling.
We have a slew of medium impact events to wade through today. The Philadelphia Fed puts out their reading at 10am. We have natural gas storage at 10:30am followed by crude/distillate inventories at 11am. Then at 3:30pm a Monthly Budget Statement will be issued.
Yesterday we printed a neutral extreme down day. It started with a range extension lower which took out the overnight low and probed just below last Friday’s low before catching a bid at making a new high on the day. Said high was only made by 1-tick, a failed auction. We then travelled back through the entire range to close near session low, earning the day an ‘extreme’ addenda to its neutral nature.
Heading into today, my primary expectation is for chop. We have option expiration tomorrow and lots of medium impact economic events. The markets are also digesting several earnings announcements. Look for sellers to work down into the overnight inventory down. They will be targeting 4332 but may stall out beforehand. Then look for two-way trade around the MCVPOC at 4360.
Hypo 2 sellers work down to 4330 and set their sights on a gap fill down to 4326.50. Look for them to take out overnight low 4323.50 and probe Wednesday’s low 4317.50 before finding responsive buyers and two way trade ensues.
Hypo 3 buyers gap and go higher, target overnight high 4366.75 then set their sights on 4384.25. Stretch target is 4392.