Technical action by S&P 500 stocks was quietly mixed on Wednesday and quietly bullish on Thursday. On Wednesday, four S&P 500 stocks broke resistance (Genzyme, Molex, Texas Instruments, Illinois Tool Works) and three stocks broke support (EDS, Comerica, First Horizon). Yesterday, six S&P 500 stocks broke resistance (Northrop, Citrix Systems, Watson Pharma, EOG Resources, Paccar and UPS) and none broke support.
Technical action by TSX stocks was quiet on Wednesday and quietly bullish on Thursday. One TSX stock broke resistance (Agrium) and none broke support on Wednesday. Three TSX stocks broke resistance on Thursday (Teck Corp. B, Gabriel Resources, Encana) and none broke support.
Interesting Charts
Crude oil and energy stocks were a focus yesterday. Crude oil broke above a three month trading range and reached a nine month high.
Chart courtesy of StockCharts.com www.stockcharts.com
Energy stocks on both sides of the border responded. Energy SPYDRs broke to an all time high. In Canada, Encana broke to an all time high.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Gold and gold stocks on both sides of the border continue to show technical signs of bottoming. They have started to develop base building patterns. Yesterday, the Philadelphia Gold and Silver Index and the AMEX Gold Bug Index moved above their 200 day moving averages.
Chart courtesy of StockCharts.com www.stockcharts.com
Chart courtesy of StockCharts.com www.stockcharts.com
Tech Talk’s Weekly ETF Report
(As published yesterday at www.stockhouse.com )
ETF 101: Seeking a seasonal entry point into the U.S. Biotech sector with Exchange Traded Funds
The U.S. Biotech sector has a period of seasonal strength from the end of July to the end of December. How is the seasonal trade lining up this year?
Five Exchange Traded Funds on the U.S. Biotech sector currently exist. Biotech HOLDRS (BBH) probably is the best known ETF in the sector. However, it is heavily weighted in two stocks, Genentech and Amgen. iShares on the NASDAQ Biotech Index (Symbol: IBB) are the most actively traded ETF in the sector. However, they do not hold Genentech, a large company in the sector with one of the best known growth profiles. The S&P Biotech SPDRs (Symbol: XBI) is an equally weighted ETF based on 30 biotech stocks. First Trust AMEX Biotech (Symbol: FBT) is an equally weighted ETF based on 20 biotech stocks. PowerShares Dynamic Biotech and Genome (Symbol: PBE) also is an equally weighted ETF based on 29 biotech stocks. Following is a summary:
ETF Symbol MER Optionable Average Daily
Volume (3 months)
Biotech HOLDRS BBH 0* Yes 227,000
NASDAQ Biotech IBB 0.48 Yes 1,143,000
Biotech SPDRs XBI 0.35 Yes 74,000
Amex Biotech FBT 0.60 Yes 25,000
Dynamic Biotech PBE 0.60 Yes 89,000
Seasonal influences
The period of seasonal strength for the Biotech sector is from the end of July to the end of December. The AMEX Biotech Index has advance in nine of the past 10 periods. Average gain per period was 12.6%. Strength during the period of seasonal strength can be partially attributed to a series of biotech/health care conferences sponsored by the healthcare industry each fall and by the investment industry in January. Biotech stock prices advance in anticipation of favourable news from clinical tests released at the conferences.
Chart courtesy of StockCharts.com www.stockcharts.com
Technical influences
The AMEX Biotech Index has a positive technical profile. Intermediate trend is up. The Index remains above its 50 and 200 day moving averages. Resistance is at its all time high at 838.41. Support is at 708.53. Short term momentum data (MACD, RSI, Stochastics) currently are neutral to slightly negative. Accumulations on weakness to its 200 day moving average at 758 are preferred.
Chart courtesy of StockCharts.com www.stockcharts.com
Fundamental influences
Clinical trial results on a wide variety of important drugs are expected to be released later this year. Conditions under investigation include Alzheimer’s, coronary heart disease, anemia, rheumatoid arthritis and various cancers. Many of the test results focus on additional indications for drugs that previously have been approved by the FDA.
The Biotech sector frequently is the subject of takeover/consolidation rumors. Large pharmaceutical companies continue to look for biotech companies that have new drugs that have reached Phase III and Phase IV levels of development.
The Bottom Line
Now is the time to place Exchange Traded Funds in the biotech sector on your watch list. The biotech sector is lining up for a possible seasonal trade as the end of July approaches.
THE CASTLEMOORE “CLASS” PORTFOLIO
What does CastleMoore think its typical Canadian investors should be invested in NOW?
Class Investor - Moderate Risk
|
Cash Equivalents:
|
|
7.5%
|
|
Canadian Equity Index:
Canadian Long-term bonds
|
|
32.5%
0.0%
|
|
Non-Canadian Indices:
|
|
60%
|
|
United States (hedged)
United States (unhedged)
US Treasury Bonds
Japan
France
Italy
|
35.0%
10.0%
0.0%
0.0%
7.5%
7.5%
|
|
|
TOTAL
|
|
100%
|
The seasonal biases that tend to power equity markets during the October to May season have dissipated, resulting in the current June swoon. As a result, we have not been active in this portfolio, pending confirmation of a summer correction.
Submitted By 
's
