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The Fed kept the overnight interest rate the same and confirmed its accommodative policy. There was nothing surprising in Fed’s statement and yet, the U.S. stock indexes rallied. Bull markets are looking for the slightest reason to rise; just like bear markets tend to sell off on any news. The reason is simple – any news can be interpreted as both good and bad. In rising markets, almost everything is accepted as being positive; in falling markets, almost everything is accepted as being negative. Gerald Loeb said it best: “the market is better at predicting the news than the news is at predicting the market”.
Semiconductors led the market higher before the trade negotiations with China ended. It was the market’s way of betting that there will be some form of a deal. At this point, the semiconductor ETF – SMH is a bit extended and most likely due for some form of consolidation – through time (going sideways) or price (pulling back to its rising 10 or 20-day EMA).
In the meantime, dip buyers continue to scoop up even the slightest pullbacks in the biotech sector. While it is true that stocks like ACAD have had a sizable decline in the past week, most biotech stocks are still in a strong uptrend. RETA, for example, is a new addition to the Momentum 50 list and it is looking ready to test its 52-week highs near 220.
Here’s a Google spreadsheet tracking all closed option and stock ideas shared on my private Twitter stream and weekly email for subscribers.