Morning Update


S&P 500 chart (SPX) - Daily chart
The daily chart shows that the SPX has broken it's uptrend line and is down 0.57% at 1263. Despite this drop, I am neutral on the SPX. Bulls live above 1246 and Bears live below 1246. Indicators and oscillators are bearish. There are no short recommendations at this time. We continue to go long above 146. The new sector that I want to focus on is the BBH. I am exiting the Oil and Energy sector and the XAU for the intermediate term.

The Biotech Holders ETF (BBH)- Daily chart
There is no index that follows the Bio-pharma stocks. There are two indexes that exist, the BBH (biotech) and the PPH (pharma). However, there is a cross between these two sectors that I call Bio-pharma stocks. These Bio-pharma stocks are: BMET, CEPH, CELG, GPRO, NBIX. These aforementioned stocks are in weekly patterns that are ideal for swing trades. If you are in a weekly trade pattern you may need to wait on average 45 trading days which is 2 months for the pattern to play out. You do not need to watch every single tick. Which may get out of the stock too early. You can also manage your portfolio through diversification and position size. Previously our portfolio was not diversified as were heavily weighted in the Oil and Energy Sector. Now, however, we are diversified in different sectors: one oil play, one gas play, gold play, Bio-pharma, insurance. The portfolio needs to be looked at as a group or as a whole. You must not cherry pick the stocks and just play one because each stock is susceptible to the sector gyrations.


On the daily chart of the BBH you can see that it is in a counter trend channel as well as completing an ABC correction within that channel. Should the BBH take out the downtrend line this would be a good catalyst for our Bio-pharma stocks to move higher.

CBOE Options Total Put/Call Ratio (CPC)
I don't normally watch the put call ratio, but I want to point out that there was a big spike in the CPC today. The SPX hasn't even taken out the lows, yet the put call ratios are spiking up to panic highs @ 1.18.

Dow Jones Industrial Average Futures - YM Daily chart
The YM chart illustrates that it is in a possible continuation diamond pattern. The INDU is the only index that took the market higher this week, and it bounced us off of the lows last week. The Dow is outperforming. However, it has been a laggard, yet now the Dow is holding the broader market up. Should YM take out the 72% retracement level at 10970 it is bullish. Should YM take out 10672 it is bearish. Stochastics look bullish.