The big news of the day was the biotech sectors breakout, did you catch it? If you were watching the NASDAQ Biotech ETF (IBB), you didn’t, but if you watched the S&P Biotech SPDR ETF (XBI), you likely did. Meanwhile, the S&P 500 continues its grind higher, up fractionally today, and again getting closer to confirming the recent breakout.

Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Subscribe to get this commentary for Free. 

The S&P 500 is up by nearly 3.5 percent with just one day left in the quarter, with Biotech and Technology leading the charge. Biotech is up 6.6 percent so far, while Technology is up over 7.25 percent. It should come as no surprise either, because these two sectors of the market have been the leaders all year, and it is unlikely for that to change. Biotech appears to have gotten a jump on the fourth quarter, today.

Biotech, S&P 500, SP500, technology

XLF data by YCharts

Biotech Breakout

The big news of the day is that after a month of consolidation biotech’s finally broke out and it wasn’t noticeable on the Nasdaq Biotech ETF (IBB), but it was on the S&P Biotech SPDR (XBI). There is a reason for that.

The XBI surged today and broke out, and it seems the ETF is likely on its way to challenging the highs of $92 from the summer of 2015.

XBI On to $92? by Scorpio244 on TradingView.com

The IBB is likely right behind the XBI and will break out soon enough, heading towards the $345 level.

XBI On to $92? by Scorpio244 on TradingView.com

Why The Divergence

It comes down to the makeup of the ETF’s. The IBB has nearly 35 percent of weighing in just four stocks, Amgen (AMGN),  Celgene (CELG), Biogen (BIIB), and Gilead (GILD). Gilead happened to be down by 3.5 percent which weighed on the ETF because the COO announced he would be resigning and also due to a court case getting reopened.

IBB – NExt by Scorpio244 on TradingView.com

 

 

The XBI is more evenly weighted, with the top 2 stock being Alynlam Pharmaceuticals (ALNY) and Exact Sciences (EXAS), with a weighting of 2.89 percent and 2.05 percent, respectively. Amgen and Celgene for example only have a weighting of 1.95 percent each. Big difference. So the ETF behave differently.

What is driving the XBI, is the performance of Alynlam and Exact Science, which is unreal! Exact Science is up almost 250 percent in 2017, while Alynlam is up 215 percent.

exact science, alynlam, IBB, XBI

ALNY data by YCharts

S&P 500

The S&P 500 managed to close today above the 2509 level, which was a new record high. It was also significant because it was above the old resistance level. It seems the market is getting prepared for a final push in the fourth quarter.

SPX by Scorpio244 on TradingView.com

Let see what the fourth quarter brings us.

Subscribe to get this commentary for Free. 

Michael Kramer and the clients of Mott Capital own shares of CELG.

Disclaimer: Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.