Get Excited for the Biotech Bloodbath

Biotech stocks have rewarded traders and investors with spectacular gains over the past few years. But the massive run-up that's drawn so much attention looks like it's finished... March 27, 2014     Get Excited for the Biotech Bloodbath   Bludgeoning biotechs A parabolic run-up comes to an end? Plus: Small-caps take a beating   Greg Guenthner coming to you from Baltimore, MD... Greg Guenthner Biotech stocks have rewarded traders and investors with spectacular gains over the past few years. But the massive run-up that's drawn so much attention looks like it's finished... A biotech blowout is bad news for stay-and-pray investors who are holding out hope for more spectacular gains. Sadly, they'll probably go down with the ship. You can't save them. But you can profit from the bloodbath. More on how in just a minute... First, a quick recap: "The Biotech iShares ETF (NASDAQ:IBB) is up more than 50% year-over-year," Rude researcher Noah Sugarman reports. "That incredible growth rate only increased in the beginning of 2014, with biotech funds seeing more inflows than they did in all of last year - after already doubling the S&P's returns in 2013." The S&P 500's biotech stocks are up more than 400% from their March 2009 bottom, versus a gain of about 180% for the rest of the market. And when you run the numbers side-by-side, it's pretty obvious where the money's going... However, this month's price action has shaved serious momentum off of the market's hottest plays, with Biotech stocks taking some pretty big hits across the board. IBB is down about 8% in just the last few days. The parabolic run-up is toast... So, if the party's over, investors should be asking themselves one question - where's all of the Biotech money headed? "There are a couple of sectors whose potential stands out to me here, but none more than financials," Noah continues. Financials could be the bucket that collects all the cash falling out of the biotech sector. BTIG sees financial companies capitalizing on economic improvement, rising interest rates and a just-completed industry-wide stress test. Those stress tests are actually a significant bull indicator for financials. The fund's top holdings - Wells Fargo, JP Morgan chase, and Bank of America, were among the 29 out of 30 institutions that passed the test. In fact, Dick Bove at Rafferty Capital notes that these companies have produced three straight years of modest returns, Noah notes, but he expects a 100% increase as they start to operate at full capacity in a healthy economy. The key to surviving the biotech bloodbath is to rotate into financial stocks. I've got a new one for you to check out in today's PRO...         Bigger than Benghazi, the IRS and the NSA Scandals… Combined? It's shocking stuff. Bigger than anything you might hear on Talk Radio. A Florida-based computer expert is breaking an incredible story. Perhaps the biggest political story of the next decade. In short, the last six years of the Democratic Party's agenda could be undone, and this whistleblower is putting everything he discovered up in a free video. You can view it for free, right here.           Rude Numbers Targets, Predictions and Wild Guesses   $2 billion buys Facebook a virtual reality game maker called Oculus. 200 million people now use picture and video app Instagram--which is also owned by Facebook. $100 buys a barrel of crude this morning. Oil is streaking higher office its Tuesday lows today, leaping back into the triple-digits. Meanwhile... $1,295 is where you'll find gold futures. The yellow metal continues to crumble, dropping significantly below $1,300 for the first time this month... 1.92% in losses posted by the Russell 2000 led the market lower yesterday. The small-cap index knifed through its 50-day moving average while it posted its fourth-straight day of losses...     Rude Trends When to Buy... When to Sell   Small-cap stocks led the market lower yesterday. Risk-adverse investors sold their smaller holdings and pushed the Russell 2000 down by nearly 2%... Small-cap stocks are likely to lag large-caps this year and produce single-digit returns, noted Bank of America Merrill Lynch Global Research small-cap strategy head Steven DeSanctis. So far, he's right. We're seeing investors pooling their money into large-cap names right now as small-caps take a hit. However, I don't see any point in predicting single- or double-digit returns for small or large stocks at this point in the year. After all, the market is chopping around near break-even at the moment. Forget about forecasting where stocks will be in December. You have to survive the spring first! [Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner]     Ignore At Your Own Peril Today's Must Read Links   "Hidden" Treasury Document Plans to Devalue Your Money Who Else is Using This Weird "Retirement Blueprint" For Huge Stock Gains? 2 Words Obama Doesn't Want You to Know     BE SURE TO ADD dr@dailyreckoning.com to your address book.       Additional Articles & Commentary: Join the conversation! Follow us on social media:         The Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Agora Financial delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from The Rude Awakening, click here. Please read our Privacy Statement. For any further comments or concerns please email us at rude@agorafinancial.com. 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