Gloom and doom, biotech selloff, and the catalyst for the low print today

Brian Shepard
January 27, 2014
mts marketrecap 330 300x207 Gloom and doom, biotech selloff, and the catalyst for the low print today
mts marketrecap 330 300x207 Gloom and doom, biotech selloff, and the catalyst for the low print today

Collective Intelligence!

IN THE EYE OF THE STORM – There was nuttin’ but weekend headlines regarding the Looming Downturn. Headlines covered everything from Chinese shadow banking sector and possible loan defaults, President Obama’s State of the Union address, emerging markets contagion concerns, PMI disappointments in China (sub 50) & U.S (while leaving out) Europe continued to show expansion, FOMC decision and taper II, III … on tap. Even covering the budget ceiling and Republicans channeling their efforts/demands into one unified front. Yeah, right! It is hard to believe everything you read these days.

Case in point: iceChat (13:28)  FLORIDA SUPREME COURT APPROVES INITIATIVE TO PUT MEDICAL MARIJUANA LEGALIZATION ON BALLOT IN NOVEMBER.  @MrTopStep Let me get this right…for years our taxes paid for jailing pot users,,,now our taxes pay for pot smoking grannies…wtf  - @BaggerDon?

Chatter Lowry Research highlights from last week * Decline last week may be the start of a correction (normal part of every bull market) * Short-term readings have warned of a weakening rally * Most evidence suggest bull market remains healthy, views correction as a buying opportunity.

From Barclay’s- Biotech: This is second biggest down day move in [XBI] since 2010 (biggest down day was 8/4/11 @ -10%). Of a list of ~75 Smid Biotech names on our launch pads, only EIGHT are down LESS than 3%. We are seeing biggest risk reduction however in Large Biotech overweights [CELG], [BIIB], but we are not seeing panic driven sales in Smid Biotech just yet.. it seems to be more ETF driven – [IBB] tracking 398% ADV, [XBI] 210% ADV).

Damn close > Snippets from last week: Started out with with defense, DEfense and morphed into DEFENSE, DEFENSE!!! Taking profits, de-risk and waves of selling while traders and investors alike acted first and will ask questions later … will this continue?  YES, there is a real possibility, but straight down would be the real question? There has been an absence of “real panic” on this downside move; however, the selloff has garnered — and deservedly so — a lot of attention … Sorry, but this all is worth repeating – besides, we have been quite busy on the trading floor lately. OK, this is it:  IF 1815.52 cash gets killed THEN the i-ii portion of the most bullish count IS DEAD and this LEAVES THE BULLS HAVING TO DEFEND THE 1767.99 LOW, MAKING THAT PRICE THE MOST IMPORTANT PRICE ON THE CHART AS GIVEN SEVERAL WEEKS AGO. THIS IS BECAUSE THE BULLS WILL BE LEFT WITH ONLY 1 OBVIOUS COUNT before the LEAN THAT GOES TO WHAT THE BEARS ARE TRYING TO ACCOMPLISH with there 1823, 1898.5 COMMITTED/CONFIRMED – William Blount.

Today started with well above average 440k ESH and 1.7k SPH traded on Globex, ESH trading range was 1776.25 – 1792.00. Friday’s regular trading hours (RTH’s), pit session trading range was 1781.80 – 1712.00 before settling at 1782.10, down 42.1 handles. Today’s RTH’s, pit session, gapped 4 handles higher to 1785.80 – 1786.50, traded an intraday high of 1790.50 before deteriorating throughout the morning, printing an intraday low of 1767.00.

iceChat (11:49) Top Notch – watch 30yr – IF stays below 132.24 and converts 132.19 to resistance = spoos rally.   What was the catalyst for the low print today? iceChat (12:50) customer bought endo 1780-1820 ps 1×4, buys the 4 when we were trading 1871.75, created 1500 minis for sale and a number of stops were triggered which sent us to the lows. chatter – premium sellers were being blown out as well. over the last couple of months there were many thousands of longs in the VIX calls. on this move there was a seller of 250k in the VIX G 22 calls 23 delta under .80 / this action could be indicative of at least short term support.

The MrTopStep imbalance Meter, MiM, showed a moderate sell of $600M on the cash close. The cash close traded 1776 area before settling at 1775.70, down 6.4 handles on the day and the biggest volume of the year at 2.7M mini’s. Another ugly day ending on a sour note – while waiting on [AAPL] earnings.

Coming events:
*Earnings pre-mrkt:  [AKS], [AOS], [APD], [CHKP], [CIT], [CMCSA], [DD], [DHI], [DHR], [F], [GGG], [GLW], [HRS], [ITW], [OSK], [LXK], [NUE], [PFE], [PII], [PNR], [ [WAT]. Tuesday post close: [ACE], [AJG], [ALB], [AMGN], [EA], [FSL], [GHL], [HUBG], [ILMN], [JLL], [POL], [RFMD], [T], [TSS], [VMW], [YHOO]