Bio-tech cannot Hold a Bid; Weighs on Nasdaq

The bio-tech stocks cannot hold a bid, and despite Friday’s stronger than expected payroll data, prices turned lower within the first 10-minutes of trading. The declines in the bio-tech sector continue to weigh on the Nasdaq, along with other momentum stocks.

The IBB (Bio-tech iShares ETF) is under pressure on Friday and is poised to test trend line resistance near 230. A close below this level would likely generate a test of the 200-day moving average near 218. Traders are attempting to exit the high flying momentum stock and are moving into energy and industrials.

Momentum on the IBB (NASDAQ:IBB) is negative with the MACD (moving average convergence divergence) index printing in negative territory with a downward sloping trajectory. The relative strength index (RSI) which is an oscillator that measures momentum along with overbought and oversold levels is printing near 37, which is on the lower end of the neutral range, but above the oversold trigger level of 30. This means that this ETF can move lower before raising the alarm bells triggered by an oversold condition.

The spread (ratio) between the Nadaq composite and the S&P 500 index has declined 4% since the beginning of March and now stands near the 200-day moving average. This spread is now oversold, printing an RSI of 29, which could possibly be a signal that the slide in the Nasdaq could be coming to an end.