Biotech Strength In Weak Market

Another bout of selling in tech and financials took down the vast majority of tradable funds Tuesday. The Biotech HOLDR showed strength in an otherwise weak market. Continued anxiety over earnings growth sent money into defensive stocks, lifting pharmaceutical and consumer staples funds.

The Biotech HOLDR (BBH | Quote | Chart | News | PowerRating) gained 2.5%, following through for its third straight gain. It was the sharpest price rise for the day among the exchange-traded funds. Among its components, Human Genome Sciences (HGSI | Quote | Chart | News | PowerRating) rose 6.5%, Genzyme (GENZ | Quote | Chart | News | PowerRating) 3.4%, Alkermes (ALKS | Quote | Chart | News | PowerRating) 5.8%.

Human Genome cleared a 14-week base. Watch out though, those of you who play breakouts for the intermediate-term trade. We're in a bear market until proven otherwise. And breakouts, as Kevin Marder points out in his latest commentary, have a high failure rate in a weak market.

In the defense arena, the Dow Jones U.S. Healthcare iShares (IYH | Quote | Chart | News | PowerRating) added 1.5%, the Utilities SPDR (XLU | Quote | Chart | News | PowerRating) 1.3%, the Consumer Staples SPDR (XLP | Quote | Chart | News | PowerRating) 0.9%, the Pharmaceutical HOLDR (PPH | Quote | Chart | News | PowerRating) 0.8%.

On the downside, the Internet HOLDR (HHH | Quote | Chart | News | PowerRating) tumbled 12.5%, hit by components America Online (AOL | Quote | Chart | News | PowerRating), which dived 17.1%, and Yahoo (YHOO | Quote | Chart | News | PowerRating) down 11.4%.

The Semiconductor HOLDR (SMH | Quote | Chart | News | PowerRating) 5.4%. Among its components, Micron Technology (MU | Quote | Chart | News | PowerRating), the biggest U.S. maker of memory chips, fell 13.9% on downgrades by Morgan Stanley Dean Witter and PaineWebber.

While earnings fears are driving much of the selling, the market has whacked stocks of companies reporting earnings growth rates in excess of analyst expectations. For my technical take on this climate, see my Trading The News.

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