The Correction As Seen in the ETP Landscape

Since stocks bottomed in March 2009, I have periodically been publishing an SPX pullback table and occasionally a plot of all those pullbacks and their duration. The recent selloff in stocks, however, has been anything but an SPX pullback. I toyed with the idea of presenting comparable data for the NASDAQ Composite or NASDAQ-100 Index (NDX), but here again, the selling has been disproportionate in some areas of the NASDAQ universe, even though it has been hit harder than the SPX.

This time around I have opted instead for a chart that shows the peak-to-trough drawdown across the equity ETP universe, focusing on sector groups that I believe are among the most important to watch.

[source(s): Yahoo, VIX and More]

The data above cover only 2014 and indicate the maximum drawdown since the 2014 peak. While many of these maximum drawdowns are from earlier today, there are quite a few instances in which the maximum drawdown was established earlier in the year.

Note that while the NASDAQ gets most of the attention, it is the small caps (IWM) that have suffered the most among the major market index ETPs.

Not surprisingly, biotechnology (IBB), social media (SOCL) and Russia (RSX) have seen the largest declines, but among cyclicals, defensive stocks and European country ETPs, there is very little to choose from.

Finally, just for fun I have added four alternative ETPs with an equity flavor (SPLV, PBP, CWB and PFF) to show how low volatility, covered call, convertible bond and preferred stock ETPs have fared.

Related posts:

• A Very Middling Pullback, So Far
• Four Years of SPX Pullbacks in One Plot
• Chart of the Week: SPX and NDX
• Banks, Large Cap Tech and Leadership
• Chart of the Week: The Resurgent NASDAQ-100

Disclosure(s): none

Biotech Breakout Confirmed

Further to my Biotech on a Tear post earlier this week, today’s action confirms that biotechnology stocks are officially breaking out. The chart below is a weekly chart of IBB, the most active of the biotechnology ETFs. It shows the ferocity of the biotech move over the course of the past month, even in the face of recent disappointing news on the Alzheimer’s front that battered Elan (ELN) and Wyeth (WYE).

Factoring in today’s 3% gain, IBB is set to close at a level not seen since the end of 2001. Note also that the candlestick patterns for the previous highs made in 2004, 2006, and 2007 all show a significant reversal pattern during the week in which those highs were made. With one more day in the week and a large buffer, the current chart pattern is likely to print a bullish pattern for the full week, in addition to the new high.

If you want to see what is hot in the biotech world, the sortable biomedical sector list at Barchart.com is a good place to start.

Biotech on a Tear

While most sectors have been faltering for the past month or two, biotechnology has been an exceptional performer, with the top biotech ETF, IBB, now more than 15% above its June low, as the chart below shows.

I last profiled biotech on May 1^st in Time for Biotech to Turn Around? In retrospect, May and June were excellent months to get long biotech, even as the broad markets headed south.

Of IBBs top ten holdings, five of the ten are currently at or just below their 52 week highs, including:

• Amgen (AMGN) – making another new 52 week high today
• Illumina (ILMN) – made a new 52 week high yesterday
• Celgene (CELG) – just 1.6% below its 52 week high
• Gilead Sciences (GILD) – 5.7% below its 52 week high, but up about 40% for the year
• Genzyme (GENZ) – 7.1% below the 52 week high, set back in January

Of course, there are many more success stories among some of the smaller cap biotechnology companies. So while the markets drift sideways and we wait to see if traditional technology stocks can provide leadership, this might be a good time to stock up on one of the few strong sectors: biotechnology.