Macro to the Forefront with Concerns about Slower China Growth…Update-2

Update-2 …7/29 12:15 EDT… New post at market close

Biotech reversal down with other sectors up; post to follow at close. Reiterate caution.NASDAQ up 0.22%, IBB down 1.3%, XBI down 2.39%, Medivation (MDVN) down over 12% to $90.9 with no news but on 7/13 JMP securities cut estimates on lower Xtandi sales. Moreover concerns may be rising on speculation after meteoric 40% rise of Nantkwest IPO with $2.7B valuation with no products and no Phase 2 data.

Update-1   7/24   12:45p EDT …Reiterate Caution- Take a little off or hedge as momentum appears broken.

Mixed results from Biogen (BIIB) with slashed guidance crashes stock 19% to $310. Red screen dominates biotech stocks with larger cap growth more vulnerable to earnings disappointments and many are reporting earnings next week. e.g. ABBV, ALXN,GILD down today. IBB down 2.25%. 

We continue to have the pattern of good earnings results with mixed guidance sparking a sell-off.

However the most overvalued stocks in the sector are smaller cap immuno-oncology speculative plays expecting deals or buy-outs. Today some are holding up well because of institutional support.

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Caution Ahead Despite Biotech and Healthcare Recent Strength

As of 1:45 PM Trading: S&P Down 0.36%, XBI down 0.4%, IBB flat, XLV down 0.19%.

Traveling this week-Limited Updates

Slower growth in China has hurt the market sentiment and earnings reports are being viewed as “half empty” despite stellar results in some cases such as Apple (AAPL). Also the strong dollar has hurt financial results in Energy, Industrials and Materials. Caterpillar (CAT) tells the story down 3.50% as of mid-market trading.

We would stay holding current biopharma and healthcare positions but not add risk. There is considerable volatility in small cap biotechs and speculation remains active.

We will update the Rayno Diagnostics and Tools sector as earnings reports come in. Illumina (ILMN) topped Q2 earnings  but as was the case with AAPL sold off from all time highs on a revenue miss and future growth perspectives.

http://finviz.com/chart.ashx?t=IBB&ty=c&ta=1&p=d&s=l

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