When Sharks Attack
As
many of you are probably aware shark attacks have been on the rise,
it seems analogous
with
our economic reports. With each economic report coming out being
disappointing, it seems to take a bite out of the market‘s
stride in getting to a recovery stage.
Today, the Conference
Board’s consumer confidence index was a
disappointment
as the markets took the numbers to heart. Economists
expected
the index to rise above last month‘s
number,
which was revised downward from 116.5 to 116.3. August’s number came
in at 114.3,
while economists were expecting a rise to 117.
It is important that we
continue to be cognizant of what is happening overseas, especially in
Europe and Japan. The reason is if there is no global recovery staged,
this would also mean the U.S. markets will continue to be sluggish.
So until we get confirmation
of a global turnaround, we must continue to be defensive and trade
with caution, because if we are going to play in shark infested waters
we better learn to do so without being eaten alive.
Now on an optimistic outlook
that a recovery might be imminent (at least in this sector I will be
talking about), I would like to present a potential turnaround play in
the Biotechnology Index. I see a potential turnaround in the sector
because it appears that the FDA’s cycle for not giving approval may be
softening.
IDEC Pharmaceuticals (IDPH)
is exhibiting some nice turn–around
characteristics. Earnings of 57%, 140%, 200% and 67%. Sales have been
on the rise also 42%, 43%, 109% and 66%. IDPH is forming a multi-week
low level cup.
Looking at the Exchange
Traded Funds, not many were in the green for the session. Among the
few that stood tall, WEBS-Korea Benchmark (EWY)
gained 0.5%
The WEBS-Australia Benchmark
(EWA)
eked up 0.4% and the iShares Utilities Sector (IDU)
gained fractionally 0.1%.
Lagging in the ETF arena,
the B2B Internet HOLDRs (BHH)
slid 5.5%.
The Software HOLDRs (SWH)
fell 5.3%.
And the iShares Internet
Trust (IYV)
closed off 4.1%.
Remember that all securities
are risky. In any trade, you should always reduce your risk by
adjusting position size and placing open protective stops where
you will sell your long or cover your short in case the market turns
against you. For an introduction to combining price stops with
position sizing, see Loren’s lesson, Risky
Business.