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The Biotech Selloff is Just Getting Started and What That Means for the Broader Market...

THERE'S MORE HERE TO BE SEEN... EVEN AN END HAS A START

An End Has a Start, Editors


Through the summer, 2015 had been a tale of two markets.  Natural resources and Chinese stocks were getting bludgeoned while healthcare and biotech related stocks continued to perform very well.  The relative strength of these sectors was so strong that they actually helped to prop up the broader market for most of the year in spite of massive losses elsewhere.

That all changed last week, however, as healthcare and biotech stocks had an allergic reaction to a combination of prospects for a stronger dollar and comments from presidential candidate, Hillary Clinton.  The iShares biotech ETF (IBB) fell more than 10% last week and has entered a very ominous bearish technical pattern...


Following the August selloff, the sector retraced to - and ricocheted off of - the 50-day resistance level.  It subsequently broke down below 20-day support and is accelerating to the downside with a widening negative moving average variance and no other apparent support levels in sight.

Having now lost the strength of its last remaining stars, the S&P consequently failed to consolidate inside of a very large variance gap... instead, the index closed below that gap and is testing poorly defined support levels with downward pressure mounting over the top in the forms of both the 20 and 50 day moving averages.

Look out below... things may be getting messy again real soon.

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