It's hard to imagine that the NASDAQ-100 Trust (QQQ) $30.97 -0.89% and broader technology is taking its queue from trading in the Biotechnology Index (BTK.X) 425.71 +2.37%, but last Thursday we alerted traders that this index may be trying to "anchor" itself and may create some near-term bullishness for the QQQ and broader technology.
"Once again" we noted in today's market monitor that the Biotech Index (BTK.X) had just managed to break back into positive territory at the 416.05 level and marked the first "tech" sector to do so after the markets took a turn lower shortly after the opening of trading.
Biotechnology Index Chart - Daily Interval
We're seeing some of the same things from the Biotechnology Index (BTK.X) today that we saw on Thursday. As it turned out, some feel that the biotech bullishness on Thursday was simply due to Biogen (NASDAQ:BGEN) $51.07 +3.2% being halted and perhaps ready to receive a favorable FDA ruling on one of its new drugs.
On Friday, shares of BGEN surged higher once the stock was opened for trading and today's gains build further on Friday's gains. According to Yahoo! Finance, there was approximately 6.07 million shares short (4.1% of the float) in BGEN as of April 8th, and today's action hints that the short interest may have built substantially since then into Thursday's announcement.
It's difficult to say that today's gains in broader biotech are anything other than short-covering, but with light trading volume in the markets, bears may simply be using today's broader market weakness to try and lock in some gains in the group.
With roughly 18 stocks that could be classified as "biotech" in the NASDAQ-100 Trust (QQQ), the biotech action is having some bullish impact on the Q's.
However, for a "stronger" rally to take place in the QQQ's and perhaps technology, a bull needs to see a past leader like the Semiconductor Index (SOX.X) 492.75 -1.37% take hold. We've seen the SOX.X recover marginally from earlier lows, but has not been able to best this morning's highs like the biotechs have.
In fact, the SOX.X has not broken above its previous day's high for four sessions (including today) and it may take a break above a previous day's high before any type of bullishness is really seen for broader technology.
Semiconductor Index Chart - Daily Interval
While the gains found in the BTK.X are helpful to a bull in the technology space, the continued edging lower in the Semiconductor Index (SOX.X) is a negative. The SOX.X has been one of the strongest sectors of technology in recent months and its continued lower technicals is analogous to the "head of the technology snake" still contracting and not giving any type of sign that the QQQ is ready to expand higher. Instead, the action between the BTK.X and the SOX.X is still showing a technology market that is trying to consolidate.