The Bear Side Catches a Break

With the glaring small cap weakness deepening this afternoon, plenty of issues in the broad market simply do not reflect the triple-digit rally we are seeing in the Dow Jones Industrial Average.

And despite the rotation threats we noted earlier, namely into the energy/materials/emerging market complex, not to mention large cap banks, the weakness in small caps seems to have sunk its claws across a variety of sectors. 

Specifically, one of our key themes for this week in our regular Weekend Video Strategy Session inside Market Chess Subscription Services hinged on the performance of the small and mid-cap biotechnology issues housed in the XBI ETF, seen on the updated daily chart, below. 

The yellow arrows point to last Friday's fade after an initial breakout attempt into blue skies above. While one mild fade did not amount to evidence to call a top, we most certainly needed to see whether sellers were able to muster the gumption to follow-through with that selling this week.

And that now seems to be the case, barring a stunning rally into the final ninety minutes of today's session. 

Now how today's candle is now a menacing, sizable red candle undercutting the key $98 level. We are printing well below it now as I write this. And the plethora of mid-cap bios which has been basing well now seem to be running out of time for a summer break out. Similar comments apply to the chips as well.

While bears have plenty of obstacles ahead, such as major earnings in FB AMZN to dodge, as well as GDP this Friday, the price action today gives them a much-needed victory to prevent the imminent upside breakout bulls were hoping for today. 

My trading portfolio is as light as it has been in a good while, as I am only riding a YINN long from Friday to play leverage in China's rally. 

Other than that, cash ain't trash.