A mixed day on the street as the minutes from the latest Federal Reserve meeting were released at 2pm EDT. The minutes revealed the Federal Reserve was quite close to raising interest rates, but failed to get the votes necessary. Will they raise them in November? We tend to think they will not prior to the election. A good chance they do so in December, but really it is anyone’s guess. Most pundits are worried the Fed will send the economy into a recession. Not the intellectual exercise we are willing to engage. We are going to focus on what really matters and let others argue over what the fed will do next.
Healthcare stocks continue to experience heavy selling. Biotech stocks have been hit hard as pressure over drug pricing continues to stay hot. Pressure over pricing power will continue and likely keep many investors away from healthcare names. XLV fell to its 200 day moving average today. Last time it was at the 200 day moving average was just after the Brexit vote. It will be interesting to see if the ETF finds support once again and return to its highs.
Biotech is unable to recapture its past glory. BIIB is one past monster continuing its march lower. For a while the stock was trying to setup for a push higher. Sellers had other ideas. REGN is another one of those past winners and it too is succumbing to the selling pressure. IBB ETF’s chart shows you all you need to know about the group. Warning signs are everywhere.
Interest rate sensitive sectors have been weak as of late. Real Estate and Utilities on the downside whereas Financials would benefit from a rate hike. XLF is certainly in a position to move higher. XLU and IYR have been hit quite hard. We’ll know soon enough whether or not the Fed is going to move rates. Let price be your guide.
This market still remains quite vulnerable given recent price action along with negative seasonality. Seasonality will take care of itself here shortly. However, this price action will need to resolve itself soon. Earnings will certainly be a catalyst for this market and at the moment expectations are quite low for this earnings season. There are no keys other than price action. Most will be looking for overall growth in revenue or perhaps earnings to guide them in their investment decisions. It’s a fool’s game.
