Putting the Hype in Hyperbole

Despite some more impressive dealmaking in the biotechnology sector, this time with BOLD up more than 100% as I write this after Japanese drugmaker Astellas Pharma bought the company for around $3 billion, the broad market remains in pullback mode as trade war headlines reemerge. 

Clearly, the lingering threat of new tariffs used as a convenient economic weapon is not something of which the market is particularly fond. But, then again, it seems as though the stream of trade war headlines at this point serves as more of an excuse than a bonafide catalyst for pullbacks and dips. Case in point: The software and biotech stocks seemed due to consolidate after impressive but steep rallies. 

At issue now, of course, is whether these pullback signal something more menacing afoot, something akin to what we saw one full year ago in the fourth quarter of 2018. 

The biggest difference between then and now would be the technical predicament of the major indices. You will note that the Dow, S&P, Nasdaq, even small caps, are all above rising 50 and 200-day moving averages now, whereas they were below declining 50 ad 200-day moving averages last December.

From a technical standpoint, that is essentially the difference between night and day. 

Thus, my near-term bias is to look for signs of stabilization and relative strength into this dip. So far, we have some mild relative strength in software and biotech today. Granted, a sloppy close would be concerning. But seeing the trade war headlines certainly lends itself to hyperbolic bears reappearing and pouring on the news flow. 

Separately, it appears as thought the precious miners are quietly having an excellent post-Thanksgiving start. IAG, below on its weekly chart, not only is strong today but also looks to be building towards an explosive-looking multi-quarter bottoming pattern.