It never ceases to amuse me how people always want a reason for everything that happens, especially in markets. You never seem to hear a news story that says, “Stocks dropped today.” It has to be paired with a news piece that must account for it, so instead the headlines go more like this: “Stocks dropped today as Ukraine fears resurfaced.”
Sound familiar?
Of course, the ‘reason’ stocks may have dropped is because they simply DID; that they dropped in the most recent instance is yet another healthy correction in the uptrending bull market that I’ve been guiding you through for months now.
Here’s another example, one you may have profited from…
In this column on March 31st I said:
As I’ve said many times before, the bull never makes life easy for you. He likes to shake out the dumb money that’s late to the party with regular sell-offs like this, and this sell-off has possibly served up a feast of low-downside opportunities in the biotech space, a sector that is set to explode in the years ahead. When cab drivers and shoe-shiners in Main Street start giving me biotech stock tips, maybe that’s when I’ll start getting worried, but currently I doubt either of those guys even know what biotech means.
Biotech has bounced 18% higher since then:
One stock I mentioned back then was Gilead Sciences (GILD):
No prizes for guessing that GILD is a big component of the biotech index in the previous chart, but with one important difference: GILD is breaking to new highs; it’s a leading stock in a newly leading industry group. And that counts for a lot.
Meanwhile, the overall market is pulling itself out of the correction I had expected, albeit a little earlier. The trend is still UP, this is a bull market in its final stage. My ‘canary in the coalmine’, as mentioned before, is this chart of the small company index (RUT):
RUT isn’t in bear territory yet, but it’s looking very much like the start of a transition to it. The long term moving average (blue line) is leveling off, and the price is below it. If RUT breaks firmly below 1,100, I’ll consider that an early warning to switch tactics, but until then there’s life in this old bull yet, and healthcare stocks are back in the lead.
Best,
Jim
The author has an interest in the securities discussed in this article. Source of charts: stockcharts.com
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