Drop, Stop, and Roll Up

What we have so far today in the market is a variation of the old, "Stop, Drop, and Roll," a fire safety technique used to extinguish flames if one's clothing catches fire. 

In this case, it is more akin to a drop (at the open), a stop (dip-buyers step in), and a roll (slow grind up for the rest of the day).

We have seen this pattern countless times over the years, which to me is part and parcel of a complacent tape where buyers are far more fearful of missing out on the next rally than they are avoiding a significant drop from here on the indices, and shorts worry about pressing too hard into weakness, therefore covering and fueling the grind up. But that is exactly the mindset which is spawned out of years of easy rates and countless Treasury liquidity "injections" in financial markets. 

Going forward, as the new month and quarter begin tomorrow to coincide with bullish April seasonality, the issue is whether the countless damaged charts supersede both dip-buyers' Pavlovian response to step in at every opening gap down alongside the noted seasonal improvements. Should dip-buyers continue to experience the diminishing returns that they have since mid-February we may very well see them finally show apprehension into these gap down which, ironically, would probably get us close to a more tradable bottom anyway. 

On that note, biotech has been a sector many bulls have been eager to bottom-tick for a good while now. Even with the vaccines over the last five years, coupled with aging Baby Boomers, the XBI ETF, below on the monthly chart, could easily retest lows from the pandemic and even before, around $70 (just a tad below it, too). In fact, I would it expect a retest and likely breach of that support level into the spring months--I strong suspect a major washout bottom is needed before biotechs are a buy again for any meaningful period of time.