The Real Potential is in Biotech

biotech with potential

In order to confirm an intermediate cycle low, price has to break the intermediate down trend line and get technical traders long. You can see that requirement was met back in October and will be met again this time.

The problem for the bears is that it will mean the market rallies above 2075. If price gets that close to the all-time highs I expect it will continue higher to test or break them.

If price makes new all-time highs then the 7-year cycle low is complete and a brand new 7-year cycle has begun.

Another problem for the bears is that this intermediate cycle is only 3 weeks and one day old. Even bear market rallies usually last 8-10 weeks. So with potentially 5-7 weeks left I find it hard to believe we aren’t goiung to test the all-time highs.

I think the real potential is in biotech which could mirror the crash phase on the way back up and test the 70 or even 80 level over the next couple of months.

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50 thoughts on “The Real Potential is in Biotech

  1. Bud Fox

    The last bull was driven by tech, social media and the fed.

    What’s going to drive another 7 year bull?

    All those industries are tired or dead. VC and private equity money is drying up.

      1. Bud Fox

        Biotech to cure to debt problem? Are you serious? I’m still waiting for your $5 gas and $50 bread.

        The boys at 1600 Pennsylvania Avenue are the reason for the debt problem.

        News flash

        Biotech has rolled over.

        1. Gary Post author

          Absolutely biotech is the cure. The debt problem stems from three out of control spending programs. Medicare, medicade and social security. Get rid of the need for those and you cure the debt problem.

          The fix for all three is for the biotech industry to cure the diseases of old age. If health care can advance so that 70 year olds feel the same as 20 year olds then there is no need for people to retire unless they want to.

          Arthritis is the main detriment to humanity as we get old. It slows us down and eventually cripples most of us. If we simply cure that one disease giving everyone pain free joints for life it would create a paradigm shift in the world.

          I envision a world where you can walk into the biogen clinic and get a stem cell shot or nano robot surgery that will permanently correct any genetic defect and walk out cured. All for the price of a Apple I-phone.

          Remember the big money is always made by making any new invention affordable to the masses. Cars started out expensive. Very few could buy one. Now everyone has a car and many people have several.

          Computers were very expensive at first. Now the whole world carries one in their pocket.

          The same thing will happen to health care.

          The thing about the human race is that we always find a way to solve any problem and we will fix our debt problem just like every other problem that has been thrown at us over the last 30,000 years.

          1. benwood

            The problem with your cure is that yes, the potential is there, but the reality of the past couple of years has proven that drugs are SKYrocketing in cost. My brother’s Parkinson’s meds have gone up 300% in the past 12 months. These were ALREADY expensive. He is now buying the two most expensive ones directly from India (with a Canadian pharmacy as a go between).

            So yes, his main meds are no longer billed to the US gov’t healthcare system.

            The disconnect I see is that these drugs which will cure one thing or another will be so expensive they will still crush the medical system, or simply not be available for e.g. Medicare. Biotech wants 1000% returns, but incomes for the masses simply will not support it.

            And for the past 30000 years ( har har) debt problems mostly been solved with hyperinflationary episodes. If you want to call that a solution, go right ahead! Revolutions often followed directly on their heels.

        2. Richard

          Think of it this way, the boys at 1600 continue to spend money, as Reagan said like drunken sailors, but worse, and the FED comes in and gives them money to spend by buying the debt. It’s a zero interest loan at the expense of the taxpayer.
          Sounds like a real good deal borrowing for nothing or a Ponzi scheme to me.

      2. tulip

        Gary, where do you propose all those old folks work….??
        Wont they need more welfare to eat & rent…????

    1. ezkappdo

      right there with you Bud…China spending to support economy , Europe banks a mess , CBs out of new ammo, services following manufacturing down, jobs produced are not middle class life sustaining, – waiting for a catalyst

  2. RickyBobby

    I agree with Bud on this one Gary – US stock market is in for a crash/temper tantrum. I think it’s gonna hit your 1600 target before FED gets aggressive and they bring in QE for the people.

    Gold looking tippy but it might just pop to $1350 now before a correction to $1239. Looking around the Internet – Even the gold permanent Bulls are all turning bearish right now. They all proclaim gold MUST go down now. For that reason, I say it surprises and runs to $1350-$1400 before a sharp and nasty, but quick, correction.


      1. Hillarys Cattle Futures

        BTW Gary … I think your theory on why the FED/PPT hammered Gold during QE3 to keep inflation contained is very sound – the best explanation I’ve heard so far… and I think your also right when you recently said; the FED/PPT now need a higher Gold price to spur inflation – and thus won’t step on the price like they did during QE3.

        1. Guacamole

          Serious question – How does a higher gold price CAUSE inflation? If gold goes up to $1400 how will that cause prices to be higher at the grocery store, or cause wages to rise? I’ve always understood gold to respond to inflation, supply & demand, etc, but never heard an explanation of how higher gold prices can cause inflation, and I suppose then the inverse is that falling gold prices can reign in inflation?? How?

          1. Hillarys Cattle Futures

            It’s sentiment/expectation driven to a certain degree … I believe the FED actually calls it “Managing Inflation Expectations” … kinda like a self fullfilling prophecy – people changing their behavior based upon sentiment & expectations.

            But the really quick fix to getting some inflation ASAP is dropping the US Dollar more … which will put a bid under Gold, Oil, Copper, Imports, and everything else priced in USD.

      2. Bill

        Which is exactly why Gold will continue to rise, those who otherwise will just continue to make excuses and miss the new high. The sell signal will come, were just not there yet.

        GDX 2 Hour MACD Hidden Bullish Divergence, MACD resets above zero and breaches trend line. Hidden bullish divergence happens when price is making a higher low, but the oscillator is showing a lower low with an eventual breakout to the upside.

        Your wish will come shorts, just not anytime soon.

  3. MuffinTop

    I actually picked up some more OIL today and a little LABU.. Waiting on the sidelines to get back into HGU 🙂

    1. MuffinTop

      SM — Still on the fence but agree with Gary that the FED isn’t just gonna roll over and die, especially not during an Election year. Remember 2011? It never happened.. The Market kept going up and up and up some more 🙂 Kinda like my sex life..!

  4. Bill

    Ill just leave this right here Gary..

    Fischer: Inflation On The Way Back Up

    “I think when the dollar stabilizes and oil stabilizes, we will see inflation going very close to 2 percent,” Fischer said in his appearance to receive a lifetime achievement award from the National Association for Business Economics.

    He said the Fed was studying negative interest rates, but he doubts that it would decide to use them.
    “We would prefer not to go there,” Fischer

  5. Jack

    I also think we are close to a top in the S&P, with energy rallying to keep it afloat. Oil can’t continue at this pace. This would be a fib top at 2009 points when you factor in the last 2 lows. Friday went as high as 2008.6

  6. John

    I can see biotech helping to help the debt problem by,for example, reducing the huge cost of chronic medical problems such as Diabetes which might be happening now a with with small companies like .SEOVF

    1. Richard

      Biotech maybe a solution, but we are in the “speculative” phase of this now. Most biotech companies do not even make money and many are in cash burn situations. We can re-visit this in another another 10 years or so. We also need to see how long the government can subsidize Obamacare without running out of money. Medicare is already broken and they have gotten themselves into another bind with Obamacare. And secondly, considering a 30 day supply of a generic antibiotic still costs $100, I highly doubt biotech will be affordable in our lifetime.
      But I like the idea.

  7. Jack

    Gary I do appreciate your work, since I found this site 2 weeks ago I always enjoy checking the chart of the day. I’m gonna have to knuckle down and sign up

  8. Gary Post author

    Gold is again on the move tonight. I hope everyone took the lesson to heart and stopped trying to short the baby bull in gold.

    Remember: maximum pain for shorts, and maximum anxiety for longs that have missed the move.

  9. Gary Post author

    Oil has reached the second resistance zone at $38. It may have to back a fill a bit before getting through that level. That could mean stocks also have to consolidate or correct for a few days. Both are stretched far above their 10 day moving average. But ultimately both are going higher.

  10. Alexandru Popovici

    with a 7YCL left behind or not, it is wise to consider that significant downward pressure will emerge in the near future as US economy overheats and FED will be compelled to continue rising rates.

    this doesn’t mean that one should not long stocks now; I am long stock myself, but it means that this rise should be taken with a grain of salt by focusing on fundamentals now and standing ready to bail out when market structure changes as smart money commence dumping in expectation of US economy cycle topping.

    1. Gary Post author

      Bail out of stocks only after biotech forms a massive parabolic bubble, not before.

      Mark my words on this one.

      There is no one that understands cycle theory better, and I’m telling you once the 7 YCL is complete (and I think the odds are good that it is) stocks are going to have at least a 3-4 year period of advancing price and that will almost certainly culminate in another bubble.

      1. Stefan

        You have had some great calls lately, but I refer it to street smartness rather than deeper knowledge about cycles. What cycle trigged the call from you for a final bloodbath phase in gold December 2013?

      2. Jacob

        I believe stocks are going up into a bubble faze also Gary, but surely they have to hit your 1600 level to spur the fed into action? I can see money piling into shares once shit hits the fan and the Feds all go full retard, but can’t see it unless. With all the goings on in the world right now, how can they just grind higher?

  11. Dan

    Cashed out of oil juniors yesterday (some for ten baggers on calls) and went long volatility.

    Time to go back to reality and to crush the bull market bubble phase hopes.

  12. Alexandru Popovici

    Gary: stocks bubble while US economy is overheating and FED is on course to step up its rate hikes ?!
    I personally find this hard to believe 🙁

    Yes, stocks can grow for a while as they have done in prior economic cycles at the same time as US economy was “cooking” hotter and hotter and the FED was raising rates aggressively (for up to 1 year and a half maximum from the first overheating signs) but….the rise can consume itself relatively soon and in no case to produce a bubble.

    The fundamental condition for a stocks bubble would be mild but not catastrophically low monthly employment, such as 130k notch is ideal but not >200k.

    1. Gary Post author

      We have negative interest rates all over the world. The only place rates aren’t negative is the US. Money will flood to the US and that will drive another bubble phase in the stock market. And if the Fed is stupid enough to also go to negative interest rates it will just exacerbate the flow of hot money into stocks and commodities.

      There are consequences to global money printing on a scale the world has never seen before. Those consequences don’t include deflation. They will be the same as the last 16 years. Bubbles will be created and bubbles will pop.

      History is a wonderful teacher if one takes the time to study it.

      1. Alexandru Popovici

        Gary, positive interest rates in US in a world of others’ money printing (BOJ and ECB) can produce bubbles indeed, in US treasuries and USX, but not in stocks.

        FED would not go into negative-interest-rate territory until job numbers falls <100k, so that this assumptions for stoking bubblish expectations is off the table under the current framework of fundamentals in US economy.

  13. Stevie

    All newsletter does the same thing. Sell the unpopular vote, that’s how they get subscribers.
    You don’t get new subscribers by going with the crowd.

    1. Bill

      Dare I ask? ok …I will please explain yourself, or better yet what is the point your trying to make?

  14. tulip

    Mar 08 Gold’s Rally: A Study In Perfection Stewart Thomson 321gold

    sharp correction when GDX hits 23..????! then sharp rally

  15. Gary Post author

    We took a little more off the table this morning in the metal portfolio. Up over 51% in 14 months.

    Not too bad 🙂

  16. Ed

    So that was you and your twitter followers.
    GDX went down 20.60 to 19.70. now.
    Thanks a lot.

  17. Gary Post author

    Oil tagged the next resistance zone at $38.40. This is a prime target for a corrective move and that could result in a half cycle low in stocks. The caveat is the FOMC meeting next week. The Fed may step in and abort any correction.

    Watch biotech if we do get a move into a HCL. If it holds up well then that’s the spot you want to be in when the market comes out of the HCL.

  18. Chris

    Alex, the bubble could also be in US stocks. Because bond yields are already so low. So funds will put into Utilities stocks, and solid tech companies.

    1. Alexandru Popovici

      Hi, Chris!
      In utilities stocks automatically, yes, they would get “infected” by Ts’ bubble but I doubt that that move could drag the whole market into a bubble. I don’t see how.

  19. BailOut-2-BailIn

    If I’m reading the charts right, there were 69 weeks in this latest S&P 500 intermediate cycle. The May top occurred @ week 31 making this Int Cycle left translated. Why would we expect higher highs from here?

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