Can Congress Ignore a 78% Disapproval Rating?
All the anticipation of the FED and Jackson Hole went to the ZEN mode-do nothing and the market will rally. Investors apparently were interpreting this as the economy isn’t bad enough to warrant stimulus. Around 10:25am today NASDAQ went into an upside reversal after being down 1%, surged and is now up 2.4%. Capital goods and technology are driving the rally up 2%. Healthcare is up 1%. Bernanke smartly shifted the burden to Congress who need to work together on deficits and jobs. The stage shifts to Obama who is planning major policy initiatives focusing on jobs to be presented in September. Roubini remains dour about the economy predicting a recession and said that Republicans will not work with the Dems because they want the economy weak so Obama will not get re-elected. Roubini thinks more QE is coming or that the FED will use more of its monetary tools.
All of our market bottom indicators are holding but in a market driven by headlines and the backdrop of the European Debt crisis anything can happen.
Here are a few technical limits to set for September trading should we test the bottom again:
S&P 500 1100 Near August 2011 Low
IBB Biotech ETF August 2011 Low of $85 with capitulation volume; Q4 strong seasonality
Selective blue chip biotech stocks need to hold August bottoms: Amgen (AMGN), Biogen (BIIB),Gilead (GILD).
In the beaten-up (at YTD lows) diagnostics and tools area we need to see buyers to return to high quality profitable players like GenProbe (GPRO $57.90 ), Illumina(ILMN $49.64) and ThermoFisher (TMO $53.43).
Our favorite mid-cap biopharmaceuticals are : Biomarin (BMRN $27.93), Cubist (CBST $32.45), Seattle Genetics(SGEN $16.57), Viropharma (VPHM $18.65).
So follow technicals and remember MACRO still rules.
The next headlines will come from Europe and Hurricane Irene.