Update-1 …Market Continues Sell-Off With QQQs Treading Water in September
Follow Technicals on FBT and QQQ.
The Federal Reserve continues to be the main concern of investors as the probability of a rate hike looms greater and sooner. Policy officials will meet next week. The Apple (AAPL) rally was whacked after being up over 4% to end barely even for the day probably due to profit taking but maybe with a realization that the iWatch may be a niche product or way too soon to tell. The “Apple Pay” however created positive buzz. Bond guru Jeffrey Gundlach of DoubleLine Funds could not help himself and panned AAPL before the announcement.
Biotech stocks continued weak with many large caps down over 1% as are the major ETFs. Medivation (MDVN) bucked the trend up 2% (up 16,6% over 301 days) on good volume hitting an all time high of $95.29. The market cap is now $7.1B , trading at a P/S of 18.5 but sales of XTANDI as reported by Astellas are expected to beat sales estimates which were $148M last quarter.
Small and mid-cap life science stocks were hit even harder with many down over 2%. Many of our new picks rallied hard in August but have come back to base levels: ACHN, CLDX, KPTI, PACB. We expect a choppy market this month with a rally in late Q4. Take some profits in huge 2014 winners: Exact Sciences (EXAS) and Illumina (ILMN) both bullish picks for 3 years. Core positions should be large cap biopharmaceuticals with FBT as our favorite ETF. Stay with 15-20% cash. THe QQQs have AAPL, large cap tech and large cap biotech has strong support at $95. FBT has support at $87.
Sellers Are Back From Vacation
Overall Market Is Stable After Slowdown In Hiring
The big summer rally of more than 10% on biotech ETFs and large caps and spectacular moves in many speculative small and mid-caps has hit a wall. Many of our recent buy recommendations are being hard hit from August highs on profit taking: Achillion (ACHN), Celldex (CLDX) and Pacific Biosciences (PACB). Karyopharm Therapeutics (KPTI) another recent pick is stable up 3.5% over five days. A red screen predominates on the 50 mid and small stocks we follow. The volatile XBI is down 2% today after hitting 3 month highs in late August.
Our large cap portfolio is surprisingly weak suggesting major institutional shuffling. It is still up 7.5% over 3 months and 21.5% YTD. Large cap losers today are Gilead Sciences(GILD) 4.75% and Biogen Idec (BIIB) down 3.65%. Our ETF pick FBT is down only 1.5%.
Merck’s (MRK) PD-1 inhibitor Keytruda was approved by the FDA for skin cancer melanoma, the first in a new class of drugs that “unleashes the body’s immune system to fight tumors”. Another drug by Bristol Myers (BMY) nivolumab that blocks PD-1 was approved 2 mos. ago in Japan.
We will review the Rayno Biopharmaceutical Portfolio next week but our view of the overall life sciences market is still bullish through Q4. The Rayno Diagnostics and Tools will be reviewed after Q3 financial reporting in October. High fliers Exact Sciences (EXAS) and Illumina (ILMN) are down slightly but near all time highs.