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Bull markets often correct through sector rotation. When leading sectors take a breather and consolidate, others step up to the plate and break out. While tech and retail shined in the past few weeks, their momentum is starting to show signs of exhaustion. I would not be surprised if we see a short-term rotation as the hot money in the market chases after other sectors. Biotech and financials are prime candidates.
The small-cap biotech ETF, XBI is setting up near its all-time highs.
The large-cap biotech ETF, IBB is building a beautiful base above its 200 and 50-day moving average. Look at this tight range contraction in the past few days. A breakout and a confident close above 110 might spur further momentum. A 4-5% move in IBB usually means 20-30% moves in some individual biotech names.
In the meantime, interest rates are perking up again, which is usually good news for financials. Here’s the regional banks ETF KRE approaching new 52-week highs.
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