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+
Seasonality is not a guarantee in most investment sectors, except
perhaps in energy and retail. It's certainly not in biotech, where
the seasonality is more a function of the investor base than
anything to do with the companies. That said, if you look at a
chart of biotech over the last decade, you'll see summer flattening
or pullbacks enough times to recognize it's a thing you have to
account for when managing a biotech portfolio.
As I've noted before
expected a summer swoon in biotech. When everyone thinks something
will happen, that's a warning signal. With that caveat in mind, I
sense more than a few folks in my chosen space are wondering when
the sector is going to pull back. Personally, I thought the break
would come after last week's quad-witching. And while the indexes
have been middling very recently, take
) for example, you can't look at the
iShares NASDAQ Biotechnology Index ETF
) or the
SPDR S&P Biotech
) and see anything resembling a June Swoon.
Five of the planned biotech IPOs for this week got postponed until,
believe it or not, next week. I just shake my head at the idea they
might have better luck in a vacation week, but more power to them.
This could be an indication that biotech is moving into a resting
period. That said, there is clearly a quality issue with some of
the names that tried and didn't make it.
The combination of a lack of scientific conferences (and news flow)
in the summer and portfolio manager vacations are likely causes of
the biotech sector's traditional summer weakness. Since nearly
everyone I know is headed out of town at some point in July,
perhaps all things have aligned to see what June did not bring us.
A less poetic-sounding July Swoon, perhaps?.
Biotech funds are tidying up their portfolios for quarter-end and
gazing at the day-end Russell Rebalance with a wary eye. While
volume is likely to look high today, it's all machines and matching
instead of strategy. The couple of traders I've spoken with today
say their desk has been as quiet as a church mouse.
One more weekend and one more trading day left in the quarter. I
hope it was a good one for you.