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Need to Know: Don’t buy into biotech’s ‘drug dream’ recovery

No one sounds all that happy about stocks these days, even as the S&P keeps trying to impress.

“Enjoy tactical rallies if you dare,” warns a Telegraph columnist. But we soon “will discover how much monetary pain can be taken by a dollarized global economy with post-QE pathologies and total debt ratios some 36% of GDP higher than in 2008.”

The S&P SPX, -0.54%  stands just 3% off its record high and up 13% from its February low. Yet disbelief is apparently running rampant, with short interest above $1 trillion and an ongoing rush toward safety plays like the yen JPYUSD, +1.512574%

Advisers feel miserable because they’re needed less during a seven-year bull market “when everything works,” says Josh Brown in a blog post at The Reformed Broker. “If you’re doing any kind of hedging or risk management or even diversification, the longer a bull run continues, the more of a schmuck you look like.”

At least S&P Global Market Intelligence’s Sam Stovall sounds like he’s managed to embrace this market — because there’s nothing else to hug.

“Equities will likely remain the asset class of choice in this low-rate environment, as history reminds investors of the importance of a lack of attractive alternatives,” Stovall says in a note.

But our call of the day is skeptical, suggesting investors shouldn’t get fooled by the biotech sector’s bounce-back from an awful first quarter. Today’s chart is also downbeat, arguing the S&P is hitting the limits of two key trading ranges.

Key market gauges

Dow YMM6, -0.66%  and S&P ESM6, -0.67% futures are pointing lower, putting the Dow on track to give back yesterday’s 113-point gain. The dollar USDJPY, -1.49%  has dropped to a fresh almost-18-month low against the yen, and gold GCM6, +1.41%  is jumping higher. Oil CLK6, -1.17% and Europe SXXP, -0.24% have been choppy.

Asian markets closed mixed, with Chinese stocks SHCOMP, -1.38% down as a ban on selling stocks expires. Yes, selling by large shareholders was banned — maybe the new campaign to rediscover Marxism isn’t needed.

The call

A closely watched biotech play — the iShares biotech ETF IBB, +0.00%  — has powered out of either a double-bottom base or an inverse head-and-shoulders pattern, depending on which chart lover you ask.

But iBankCoin blogger The Fly isn’t buying it — instead, he’s mocking biotech’s believers. He suggests there isn’t support for the sector’s recent jump in its earnings or other fundamentals.

“If your desire is to live in Fantasy Land, what better place to be other than the biotech sector, an industry without fundamentals and the albatross of having to meet earnings expectations,” he says.

“This is the only sector that offers high returns, based on a drug dream similar to playing the lottery, that goes unrivaled in the market place,” he adds.

Other traders are buying, though. NorAm Asset Management’s Tim Reazor says his shop bought IBB on Tuesday, ahead of Wednesday’s 6% jump.

“Instead of getting into an argument on the fundamentals of the market [or] the global socioeconomic situation, I think if you focus on setups, it’s going to lead you to clearer thought,” Reazor says. “And that’s exactly what played out in this setup of IBB.”

Read more: Valeant’s stock rockets to best two-day gain in 20 years

And see: This biotech ETF and two other ETFs are all you need to own now

The chart

The S&P is about to “hit up against the upper bound” of a two-year trading range between 1,800 and 2,100, says WisdomTree’s Luciano Siracusano in a blog post that offers the chart above.

That means “a new period of turbulence as we go deeper into the second quarter,” he says.

In his chart, WisdomTree’s chief investment strategist shows another range, based on price-to-earnings ratios, that could limit the S&P.

He advises investors to navigate a sideways market via funds that collect option premiums or maximize dividend income.

The economy

Fed watchers have been getting excited this week about this evening’s Fab Four reunion:

INCOMING: The Dream Team. Thursday 5:30pm#yellen #bernanke #greenspan #volcker

— Northy (@NorthmanTrader) April 4, 2016

Janet Yellen and three former Fed chiefs will be “in conversation” at an event in New York scheduled for 5:30 p.m. Eastern Time. This comes after Fed minutes yesterday confirmed that an April rate hike is unlikely.

Ahead of the open, weekly jobless claims roughly matched forecasts, and European Central Bank minutes didn’t rule out further rate cuts.

The buzz

CarMax KMX, +0.71%  , RiteAid RAD, +0.00%  and ConAgra CAG, +0.79% posted earnings before the open, while Ruby Tuesday RT, +0.39%  and PriceSmart PSMT, -0.88%  are due to report after the close.

Companies should be fearful because the words “activism” and “BlackRock” BLK, -0.82%  have been mentioned together, a New York Times report says.

The German newspaper that was handed the Panama Papers says it won’t share all of the leaked documents, saying there’s no public interest argument for opening some up.

Victoria’s Secret, owned by L Brands LB, +0.46%  , plans to cut 200 jobs and eliminate certain merchandise categories.

Bed Bath & Beyond BBBY, +3.73% and Wynn Resorts WYNN, +7.85%  are both higher premarket after their quarterly results late Wednesday.

The stat
AFP/Getty Images

43% — That’s the share of Americans who aren’t making payments or are behind after borrowing from the U.S. government’s main student-loan program. New figures illustrate the fallout from a decade-long borrowing boom.

The quote
Getty Images

Robert Griffin III (right) shakes hands with kicker Phil Dawson of the Cleveland Browns.

“I’m not trying to let any baggage hold me down … but I do have a massive chip on my shoulder.” —QB Robert Griffin III sounds off in his introductory press conference with his new NFL team, the Cleveland Browns.

In another comment that showed he’s not afraid of contradictions, he disagreed with his socks. And then RG3 said “no pressure, no diamonds,” channeling a 19th-century Scottish essayist.

Random reads

“Star Wars” fans had a reason to watch “Good Morning America” today:

WATCH: The first trailer for #RogueOne: A @StarWars Story.

— Good Morning America (@GMA) April 7, 2016

A waffling Mick Jagger sees a long-term benefit to “Brexit,” but short-term problems.

“America is the country of freedom … we are looking forward to having a good life over there.”

Texas school cop on leave after a viral video shows body slam of 12-year-old student.

The Scandinavian effort to turn NJ preschoolers vegan.

Xiaomi’s new tablet can morph into a Transformer

— Wired UK (@WiredUK) April 7, 2016

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Need to Know: Don’t buy into biotech’s ‘drug dream’ recovery Reviewed by on . No one sounds all that happy about stocks these days, even as the S&P keeps trying to impress. “Enjoy tactical rallies if you dare,” warns a Telegraph colum No one sounds all that happy about stocks these days, even as the S&P keeps trying to impress. “Enjoy tactical rallies if you dare,” warns a Telegraph colum Rating:
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