Market review 22.07.03
The damage done in June, biotech, Thorp part 2
Hello everyone,
The first half of 2022 is in the books. And it was the worst since 1970 for the S&P 500.
Apart from biotech and China, June was an ugly month for most risk assets:
Looking at monthly charts for countries and sectors, things were looking promising at the end of May when the market bounced off major support levels. But June candles pierced through those levels causing lots of technical damage. Below are 4 examples.
Meanwhile, the US dollar made a major breakout in June.
The areas of the market holding up the best are utilities and health care. The areas that are the weakest are the most highly speculative: crypto equities and weed. The market is in clear risk-off mode.
Biotech
As I briefly touched on in the past 2 blog posts, one sector showing signs of life is biotech (no pun intended).
Here’s XBI Daily showing a 2-month breakout. XBI is the equal-weighted biotech ETF.
And here’s IBB Monthly. IBB is the cap-weighted biotech ETF. Both May and June candles formed bullish wicks off bollinger band support.
That’s a 7-year sideways base in IBB within a long-term uptrend. Definitely a sector that has stored energy.
Looking at individual stocks, there’s now a number of names that are at/near 52-week highs including: ARGX, UTHR, VRTX, AMGN, SGEN. The latter 3 make up almost 20% of the IBB ETF. Checkout the monthly charts for these names - they look great.
Interestingly, biotech is a sector with one of the lower correlations with the S&P 500.
The above chart was found in this paper: Innovations in Biotech. It makes the bullish fundamental case for this sector.
However, keep in mind: biotech is a volatile sector that is still in a large 50%+ drawdown. And the broad market is bearish. Focus on the price action and manage risk.
Ed Thorp Part 2
A month ago, I wrote about Ed Thorp’s appearance on the Tim Ferriss show. Tim had Ed back on this week, and you can checkout that interview here: link.
Stay safe out there and enjoy the rest of your long weekend.
Twitter: @alphacharts.
Important Disclaimer:Â This blog is for educational purposes only. I am not a financial advisor and nothing I post is investment advice. The securities I discuss are considered highly risky so do your own due diligence.