Last month's relative strength to the broad market is the reason BBH rallied 2.1% yesterday, compared to just the 0.4% gain in the S&P 500. If the major indices continue higher in the near-term, BBH should continue to outperform their gains. On the weekly chart below, notice how BBH just broke out above an eight-month downtrend line:

There are several other biotech ETFs to consider, but BBH is clearly showing the most relative strength. This is because the large-cap biotech stocks rallied the most yesterday, and BBH is primarily comprised of large-caps. We're stalking BBH for potential buy entry today, and regular subscribers to The Wagner Daily should note our detailed trigger, stop, and target prices for the setup below.

In addition to biotech, the brethren pharmaceutical sector also fared well against the broad market last month. Unlike BBH, the Pharmaceutical HOLDR (PPH) is sitting near its 52-week low, but it held in a sideways range and refused to move lower alongside of the S&P 500 over the past several weeks. As such, PPH may also present a low-risk buying opportunity, just because of its relative strength. However, its daily and weekly chart patterns are certainly more bearish than BBH.

As we've been saying for the past few days, new short sale entries at current levels do not carry a positive risk/reward ratio. Even though Market Vectors Agribusiness (MOO) has begun to show relative weakness and close lower yesterday, we avoided selling it short specifically because it is now out of sync with the broad market, which is poised to bounce in the near-term. Nevertheless, if the broad market rally attempt fizzles out quickly, agriculture ETFs may lead the way lower because they appear to have entered correction mode. The Market Vectors Steel (SLX) has also begun to show relative weakness and may become a downside leader in the short to intermediate-term. We are currently short SLX, and showing an unrealized gain of more than 3 points. If it can manage to show enough weakness as the broad market bounces, expect it to make another leg lower in the near future.

Even though we now anticipate a near-term rally in the broad market, it would be foolish to expect anything more than a tradeable, counter-trend bounce. There is an abundance of overhead supply, along with resistance of even the very short-term 10-day moving averages. If the major indices suddenly get their mojo back and start to move back above their 20-day exponential moving averages, we'll re-assess the technical situation. But until then, we are viewing any new entries on the long side as strictly momentum-driven bounces that we are prepared to exit quickly.

Open ETF positions:

Long - (none)
Short - SLX