Thinking more about this, many folks were trying to pick "safe" stocks last year already. People forget how fast things can go. And despite bios being up since late January as a group, the up/down crush along with speed of the moves and the length of the declines this past fall have worn people out. Every time since mid Nov that XBI got close to previous week's prices, it shot down, killing hope. Broke seasonal patterns even.
So today, early on, $XBI was being faded hard into low $60 area. Hard. Sellers not concerned - it only maybe had 1% of upside so no fear. Buyers were scared. Boom. I commented on Twitter about the pushback at $60. An hour later I was commenting about air gaps (pockets correct word) as it exploded into $60.60s. In my own mind, I thought that was probably it for the day not connecting the air pockets to a 3% further move up. I even laughed with a twitter friend that I found it weird IBB was likely to score a higher high than December (1% away) more quickly than XBI could get a higher high than last week (3% away). Both happened within 1 hour. It took 7 weeks, SEVEN, to kill the XBI downtrend and it is still off 10% since Nov.
Funny thing is folks will see the move and say it is almost over. Ask those shorting banks how that worked out. Or those short energy. I had multiple studies of price action coming INTO today suggestive of a nice move higher over a few months and longer. We may be done now, but my sense is the higher ends of these studies may play by later in year. In some ways, we are still in June/July 2009. The next 18 months had some big downs but very big up overall.
We really need over $300 IBB to confirm bear kill because last I looked we were grinding along a 1 year bottom on that index. That is 12x longer than the action preceding today. What if folks have gotten comfortable in a false equilibrium. Bios were the last short still working. The bottoming base is incredibly long - unlike 2008/2009 but longer.
To me, this week reminds me of the start of the contest rkrw beat me with 150+%. He and I kept going back and forth privately amazed. Odds of repeating this year are higher than you believe. BUT until we get $300 IBB and $70 XBI, we are still kind of in the bear.
Jon |
