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Todd Harrison: Sector Rotation Dominates the Market After February Payrolls

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The biotechs, banks, and transports will tell the tale today.

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Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO.

The new phonebooks are here, and the February payroll is out. Let's dive right in.

The number was better than expected -- which is a good step for the economy but a bad sign for the taper. For a long time, bad was good (bad data equaled more tapering), so we must consider the other side of that sword.

I'm watching the biotech sector as one of my primary trading tells; IBB (NASDAQ:IBB) 260, as discussed yesterday on the Buzz & Banter (subscription required) and again this morning, should provide clues to the short-term tech fuse.

Looking the other way, the banks and transports will help the bulls if they can push through BKX (INDEXSP:.BKX) 71.50 and TRAN (INDEXDJX:DJT) 7600, respectively.  A move through those levels will help qualify (confirm) the breakout in the S&P (INDEXSP:.INX), if and when.

As I write this, the biotech complex just took a hard turn lower as the banks and trannies are trying to lift higher. The bulls will argue, "Rotation, rotation, rotation!" but they can only say that if they do so in their best Mel Brooks voice. 

It's a recipe for "S's over N's," or S&P outperformance of NDX (INDEXNASDAQ:NDX), at least for the session.

Random Thoughts:
 

  • Why all the concern about deflation?  To channel an oldie but goodie, "Deflation in a fractional reserve banking system means that central banks have, for all intents and purposes, lost control of the economy."
     
  • Our overseas banking proxies -- Deutsche Bank (NYSE:DB) and Barclays (NYSE:BCS) -- both opened red in an otherwise green sea, which is typically a sign of supply waiting in the wings. Watch these stocks; they're screaming to be watched.
  • Minyanville's Alex Brokaw wrote a solid Bitcoin article that's worth a look.
     
  • Did anyone else have the thought, "What did the world's most shared selfie mean through the lens of socionomics?" Hey, me too!
     
  • We've positioned MV PRO as the HBO to basic cable, given the digital waterfall of information in the marketplace. It's an entirely better user experience with a robust data set of tools, and we're interested in your thoughts.
     
  • The VXO (INDEXCBOE:VXO) (fear index) should remain on your radar for reasons we've discussed.
     
  • The S&P chart is an extremely attractive chart (Hi, I'm Todd), but it's just that -- a chart nestled within a multi-linear dynamic.  It "works" to S&P 1960, but we should respect, not blindly subscribe, to any one metric.

 
  • The Bear Scare? My friend Doug Kass highlighted the chart below, asking if the last short seller would please turn out the lights.

 
  • The last time I used "The Bear Scare" as a title was in March 2008, when I was in the Bear Stearns Board Room and asked the head of credit why the long bond was up two full points. "There's a rumor of problems at Bear Stearns," he said. The next day, the stock -- and company -- crashed. We've come a long way baby.
     
  • I wrote, "The most successful people I know are also the most grateful people I know" on Twitter last night, and a few folks said, "They're grateful because they can pay their bills."  The funny thing is, I never said success was wealth.
     
  • Have a great weekend; you've certainly earned it.

R.P.

Twitter: @todd_harrison

Follow Todd and over 30 professional traders as they share their ideas in real-time with a FREE 14 day trial to Buzz & Banter.
No positions in stocks mentioned.
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