Wednesday, January 04, 2006


Marketz & Sectorz & Strategies : Why is Pharma rallying ?

Pharmaceuticals continued to rally today spectacularly overcoming the 200 DMA on nearly twice average volume. This move in PPH is BIG.

As the 2 year and 6 month charts show, big cap pharma has been in a severe bear market for the last two years and the bounce might merely be a rally from oversold conditions.

However, I am not inclined to think so. Heavy volume has accompanied this upward move in the pharmas which started in late Dec when the broader indices tripped a little bit. The impressive On Balance Volume seen in the charts clearly indicates hevay money flows into this sector.

It makes me wonder if the smart money knows about the impending slowdown and is already moving into defensive sectors.

Coming to think of it, some of the other defensive sectors dont look that defensive anymore. Defense has enjoyed the benfits of war-spending for nearly three years now and defense spending seems to have either plateaued or in the process of plateauing. Utilities have enjoyed a huge rally all year and look ripe for a correction.

That leaves Consumer Staples. XLP bears close watching.

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