I have been increasingly concerned about the action in the overall stock market for some time, and the action on yesterday (8/24) afternoon and this morning suggested that it’s time to buy some portfolio protection.  So I am recommending the purchase of the ProShares Ultrashort ETF (BIS) as a hedge for a diversified biotech portfolio.

In my Aug. 22 BTP Weekly update I noted that I was concerned about “the combined affects of recent new highs in the major indexes, the possibility that the Federal Reserve may raise interest rates in September, and the ramping up of election politics.” And that’s exactly what seems to be developing.  Yesterday (8/24) afternoon the biotech sector reversed course and delivered a nearly 4% intraday loss after Democrat presidential candidate Hillary Clinton tweeted about her concern regarding the high prices of Epipen, a medication delivery system for severe allergic reactions.   On Thursday morning Kansas City Federal Reserve president Esther George told CNBC that it’s time to raise interest rates gradually.

These may be passing events.  And the market’s electronic high frequency traders are known to buy every single dip.  Yet, in my opinion, it is possible that we may see lower biotech prices for longer than a few days, especially if Fed Chair Janet Yellen delivers bearish remarks in her speech tomorrow (8/26) at the Jackson Hole central bank summit.

I will have more in my Monday update. 

Buy ProShares Ultrashort ETF (BIS) from $33 to $36.  Use an 8% trailing sell stop. 

Disclosure: I own shares in BIS