The market has performed impressively recently given the sovereign challenges in Greece, Puerto Rico, and Ukraine that dominate the headlines; not to mention the recent plunge in Chinese equities which authorities seem to have arrested over the past week. It is in my opinion that my favorite high beta sector in the market is due for a significant pullback.

On top of the regional troubles, this quarterly earnings season has been a ruse in my opinion with most companies posting better than expected profits on expectations that were lowered over the past two months. That is the equivalent of applauding an athlete for making it over the bar after the judges lower it, keeping the illusion of success alive.

Despite the collapse in profits from the S&P 500, the market has managed to grind up even through the federal reserve completing its last quantitative easing program last October. The market has been driven up mostly by momentum and high beta stocks as investors bid up anything than can promise solid potential future growth rates given how tepid demand is globally right now. I don't believe the market will continue to behave this well. Here's how I am preparing my portfolio to weather any significant pullback in the small cap biotech sector.

The enthusiasm for the small cap biotech sector is quite something right now. This is understandable given the top gainers within the market during the first half of 2015 is dominated by names from this space. It is hard to keep track of all the small biotech/biopharma stocks that have doubled, tripled or quadrupled in the first six months of the year. Not to look a gift horse in the month, given Eagle Pharmaceuticals's (NASDAQ: EGRX) 464% gain has easily been the best gainer in the one year history of the Small Cap Gems portfolio, but this sort of rally cannot continue.

I was out in San Francisco early in the week giving a biotech presentation at the Money Show as well as an interview around the biotech space for one of the largest financial websites in China.  Ninety percent of the questions that I received from attendees to both events were all around the small biotech arena. No one seemed to want to discuss the less volatile large cap names in the sector that still offer reasonable valuations that should make up the bulk of any diversified biotech portfolio.