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Biotech morning notes


Whew, I'm getting tired!

It was a great day in biotech, marred by a post-close miss in Amgen (AMGN). This giant is a member of both the NASDAQ Biotech Index (NBI) and the AMEX Biotech Index (BTK) so weakness today will be felt across the sector. Despite the miss, it was only down slightly after hours though it was well off its session highs.

Breadth yesterday was fabulous with 136 advancers to just 20 decliners in the NBI. That's the best breadth in a month and, if memory serves, quite a bit longer than that. Companies whose volume increased on this up day numbered 81 versus the 78 whose volume declined. I would much rather have seen higher volumes on such a strong day, especially compared to Wednesday when the breadth readings were almost reversed (30 advancers to 123 decliners).

Market bulls were damn giddy today, pegging the gains as caused by happenings as diverse as "the death of stagflation" (via the Philly Fed report), big earnings (the Google (GOOG) effect), or the "I knew it would rally all the time because of the bearish sentiment" effect. I suspect all have some validity in portions.

Frankly, I care why only a little. I much more want to know if it is sustainable. I wrote yesterday that Boo's crew was salivating as they believed this was the time all their macro worries would matter and finally serve to accelerate a market decline. Now Hoofy's crew has to wonder if the large short interest will accelerate things on the upside? I'm going to be darn interested to see the NASDAQ short interest data next month.

I'm not saying it will, but if this rally has legs beyond the 2005 highs I expect the short interest levels will begin to matter.

I suspect biotech will be beholden to Amgen this morning. A big drop in that name will tarnish the rest of the sector. If it holds the line, I'd expect biotech to close green today. That's not advice because I'm not certain biotech will outperform quite yet and, of course, because we don't do advice on the 'Ville.

Finally, I must say thanks for the nice comments about my ASCO piece yesterday. Many of you picked up my passion for this disgrace and I am glad many of you share it.

Have a good day then hang it up for the weekend. Leaving the office at the office on Friday is the one guaranteed profitable trade you will make every week.
No positions in stocks mentioned.

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