One of my fondest childhood memories was Mom and Dad taking my brother and sister and I out on a sunny and windy weekend day in the month of March to fly kites.
We've all heard the saying "In like a lion and out like a lamb" as it relates to March and this has been somewhat of a historical trend for the markets over the years.
Late Friday night, I flipped by Stock Traders Almanac page over to this week and Monday-Friday was flagged with little "bull heads" to indicated to historical probability for market action. I guess I should have done this last week, but the data is fascinating and may be in play currently.
Some of the most powerful and bullish Dow Industrial gains have come on the first three days of March, but as the "kite flying season" progresses, the latter part of March sees the lion falter and the lamb return and the markets have a tendency to experience some rather sharp losses. That's when the lamb shows up and some end of quarter losses show the Dow Industrials succumbing to some hefty selling.
Take last year for example. From March 1 to March 8, the Dow gained 363 points (10,495-10,858), and then got crushed into the end of the month to a March 22nd low of 9,106, to then recover somewhat by month's end to 9,878.
The Stock Trader's Almanac points out that the last three days of March have been a net loser 8 out of the last 9 years.
It's interesting to note however that some of the more bullish sectors for March, despite the "in like a lion, out like a lamb," have been the Airlines (XAL.X), Natural Gas (XNG.X), Oil (OIX.X) and Forest/Paper Products (FPP.X). The sector that trades the weakest you ask? The Biotechs (BTK.X). Like I said, I think I should have turned the page a little sooner. Last week I turned bullish on the biotechs. I am a believer in market history and some of the things that the Stock Trader's Almanac points out.
On premierinvestor.net, we currently have the Biotech HOLDRS (BBH) $116.75 -0.93% on our bullish play list from profiled entry at $120 and a stop at $114.
Today's negative action in the Biotechs is being helped along by a downgrade of Human Genome Sciences (NASDAQ:HGSI) $20.29 -13.7% as the stock was downgraded by Thomas Weisel Partners to "market perform" from "buy" based on the view that one of the company's lead drugs (Mirostipen) has a low chance of becoming a significant revenue generator. TWPartners believes that concerns for this drug will weigh on the stock near-term.
Human Genome Sciences Chart - $1 and $0.50 box
Most sectors will have some stocks that are at the "bottom of the food chain" and these stocks are best left alone by bullish traders. As it relates to the biotech sector, it is relatively evident that shares of HGSI have been giving sell signals as supply outstrips demand and this will most likely weigh the Biotechs as long as it lasts.
Our "key" stock in the group and sector bellwether, Amgen (NASDAQ:AMGN) $58.25 +1.23% is perhaps capable of offsetting some of the negativity that was brought on by Thomas Weisel Partners downgrade of HGSI, but even here we see some bullishness perhaps limited as the sector just isn't responding today.
In all, we'll stick with our original plan. While I'm a firm believer in "market history" it is not the overriding factor of our trading plans. It does however give us some interesting insight into how stocks trade near-term.