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Welcome to the Biotech Bear Market


A look at the market action following the big NFP report.

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Let's take a look at what's moving in terms of sectors on what is turning out to be a very ugly NFP day.

This morning, the homebuilding stocks were firmly in the green -- now they're barely hanging in there. iShares Dow Jones US Home Construction ETF (NYSEARCA:ITB) was up 2.3% at one point this morning, but it couldn't hold.

Biotech is getting destroyed once again, and the iShares Nasdaq Biotechnology Index ETF (NASDAQ:IBB) just went negative on the year as it broke the 2013 close of $227.06.

At the top on February 25, it was up 21.3%!

The other major biotech ETF, SPDR S&P Biotech (NYSEARCA:XBI), is just a hair above going red year-to-date.

That one was actually up 32.5% at its February top! Crazy!

My other favorite risk proxies -- cannabis play GW Pharmaceuticals (NASDAQ:GWPH), fuel-cell names Plug Power (NASDAQ:PLUG) and FuelCell Energy (NASDAQ:FCEL), and the Global X Social Media ETF (NASDAQ:SOCL) -- are all getting smashed.

The Utilities SPDR ETF (NYSEARCA:XLU) is doing quite well, up 1.1%. (By the way, if you haven't been following Michael Gayed's work on utilities, I strongly suggest you do. They've been going straight up this year.) In the next chart, I plotted it against the Russell 2000 (INDEXRUSSELL:RUT) -- it's a pretty good illustration of how much things have shifted as the market is grinding higher. Big Pharma names have also done pretty well.

The bulls have quit pressing the bets that worked best in 2013, namely, biotech and social media.

I don't necessarily like the breakdown in high-beta. However, I do think some cooling off is healthy ahead of earnings season so we can repeat the theme from 2013 -- low expectations as measured by terrible guidance, followed by companies clearing the lowered bar.

For now, hold fast!

Twitter: @MichaelComeau

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