The indices moved higher on Monday with the Russell leading the way with a gain of 0.99%. The Nasdaq was close behind with a gain of 0.91% while the S&P came in with a gain of 0.69%. Boeing hurt the Dow, but it still finished with a gain of 0.21%. Positive comments from a Chinese official about the trade talks helped buoy stocks.
Eight of the 10 main sectors moved higher on the day with the energy sector leading the way with a gain of 1.81%. The sector got a boost from positive earnings results from Halliburton.
[hana-code-insert name=’adsense-article’ /]The financial sector finished with the second best gain at 1.39% and the tech sector gained 1.05% to give us three sectors with moves over 1.0%.On the down side, the materials sector finished with the worst return at -0.30%.
The healthcare sector was hit with some bad news over the opioid crisis as four companies reached a settlement with specific counties in Ohio and that led to a loss of 0.09% for the sector.
My scans remained negative, but they weren’t as bearishly skewed as Friday’s results.
There were 10 names on the bullish side of the equation and 37 names on the bearish side.
The barometer didn’t change much, moving up to -38.3 from -38.4.
A number of the stocks and ETFs on the bearish list were from the healthcare sector. The SPDR S&P Biotech ETF (NYSE: XBI) was one of the ETFs on the list and the chart was intriguing. There was also a bearish signal from the Tickeron Trend Prediction Engine. Past predictions from the AI tool have been successful 95% of the time.
The daily chart shows a rather clean downwardly sloped trend channel with the XBI right at the upper rail. The daily stochastic readings are in overbought territory and made a bearish crossover last night and that is the same setup we had in mid September before the fund fell over 13%.
Buy to open the December 82-strike puts on XBI at $4.10 or better. These options expire on December 20. In order for these options to double the fund will need to drop to $73.80. The lower rail of the channel is right at that price level currently, but will be considerably lower in the next few days. I suggest a target gain of 100% with a stop at $81.50.
— Rick Pendergraft
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