In our divided country there are very few things on which Republicans and Democrats, liberals and conservatives agree.  One of those very few things is that drug prices are too high.  It makes no sense for Americans to often pay ten times more for a drug than Indians and Chinese.  The premise behind the trade was that with Trump’s leadership, the pharmaceutical  lobby would not be as influential as it has been in the past.  This premise is turning out to be at least partially correct.  However pharmaceutical and biotech stocks continue to levitate.  Why?

LABD is an inverse ETF, it will go up when pharmaceuticals and biotech go down.

Stock market is like a beauty contest where beauty is in the eyes of the beholder.  In this case, judges are big institutions. Big institutions behave like sheep.  Right now the sheep have decided that Trump will fail as a leader in brining drug prices down.

It is worth noting that the Wall Street herd can quickly change direction.

Trump is taking another shot at the healthcare bill.  Outlines of the proposed bills we have seen do not include drug pricing.  Emphasis is on a symbolic repeal of Obamacare.

Trump says drug prices will be included in phase two.  Phase two is not likely until 2018 but the market is likely to start moving about six to nine months in advance.

What To Do Now

Those in LABD may consider reducing the maximum position size in small increments on favorable up moves from a maximum of 25% to a maximum of 15%.

Those not in LABD may wait for a signal on the Real Time Feed.