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Ugly Russell and the Biotech Blues


High-beta stocks are having an awful day.

This article was originally posted on the 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+.

Following a solid day yesterday, momentum stocks are getting smashed today.

Here are five things you should be watching:

1) On Monday, I posted a 5-year monthly chart (subscription required) showing that extreme outperformance in the Russell 2000 (INDEXRUSSELL:RUT) against the S&P 500 (INDEXSP:.INX) sometimes proceeds a market slump.

Here's an updated version:

Click to enlarge

As you can see, the Russell 2000 really was on a streak for the ages -- and now we're paying the piper, though some cooling off ahead of earnings season maybe isn't the worst thing in the world.

2) Biotech is looking very ugly with iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB) testing Tuesday's interim low of $221.18, which just about marks 20% off the $275.4 February 25 high.

3) My proxies for extreme risk -- namely marijuana stocks from such companies as GW Pharmaceuticals (NASDAQ:GWPH) and fuel cell stocks from the likes of Fuel Cell Energy (NASDAQ:FCEL) -- are looking really rough.

4) Internet security player FireEye (NASDAQ:FEYE), which is more or less the current top dog among tech momentum names, is down almost 10% on the warning profit warning from Imperva (NYSE:IMPV). Our colleague Sean Udall (subscription required) pointed out that FireEye may actually be winning business from Imperva, so this is a good example of traders' willingness to shoot first and ask questions later.

FireEye is now down 48% since March 6, so if you still need a symbol for deflated momentum, you've got it.

And Imperva? It's down 42.5% today.

5) The Global X Funds Social Media ETF (NASDAQ:SOCL) is actually below where it was at the November 6 Twitter IPO, when it closed at $19.52.

Be careful out there!

Twitter: @MichaelComeau

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No positions in stocks mentioned.
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