Below is a table (via Finviz.com) that details YTD industry performance – biotech has been a standout YTD, up 22% and in 11th place out of all industries.
That said, in the chart below the group’s YTD rally, via the DJ Biotech Index, has taken it up to long-term resistance line (1).
The last two times the index has faced this resistance line it has gone on to decline 52% and 32%, respectively, including 2001 and 2008.
Not only has the line itself portended weakness in bio-techs, but the last two times it’s been in play the SPX has been at the top of bear market retracement rallies in front of material declines itself.
Pay close attention to this leadership group – when leaders begin to give way the case for broader market upside becomes much weaker (and downside much stronger).
Should bio-techs be able to take out line (1) to the upside in sustainable fashion, odds would increase that the broader market could continue higher as well.