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S&P 500 Snapshot: A Record Close to End the Week

Courtesy of Doug Short.

The pre-market economic news was the release of the March Durable Goods, which had a strong headline number, but Core Capex posted its seventh consecutive decline and is down 4.0% year-over-year. The S&P 500 vacillated in the opening minutes and then trudged higher to its 0.38% intraday record high. The index then moved sideways most of the afternoon before settling for a 0.23% closing gain — enough for a new all-time record close.

Today the yield on the 10-year Note closed at 1.93%, down three bps from the previous close but above the 1.87% close last Friday.

Here is a 15-minute chart of the week.

Here is a daily snapshot of SPY ETF, which gives a better sense of investor particiaption (or lack thereof) in today record-setting move.

A Perspective on Drawdowns

Here’s a snapshot of selloffs since the 2009 trough.

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For a longer-term perspective, here is a charts base on daily closes since the all-time high prior to the Great Recession.

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NYSE Margin Debt Hits an All-Time High

Courtesy of Doug Short.

Note: The NYSE has released new data for margin debt, now available through March. I’ve updated the charts in this commentary to include the latest numbers.


The New York Stock Exchange publishes end-of-month data for margin debt on the NYXdata website, where we can also find historical data back to 1959. Let’s examine the numbers and study the relationship between margin debt and the market, using the S&P 500 as the surrogate for the latter.

The first chart shows the two series in real terms — adjusted for inflation to today’s dollar using the Consumer Price Index as the deflator. I picked 1995 as an arbitrary start date. We were well into the Boomer Bull Market that began in 1982 and approaching the start of the Tech Bubble that shaped investor sentiment during the second half of the decade. The astonishing surge in leverage in late 1999 peaked in March 2000, the same month that the S&P 500 hit its all-time daily high, although the highest monthly close for that year was five months later in August. A similar surge began in 2006, peaking in July 2007, three months before the market peak.

Debt hit a trough in February 2009, a month before the March market bottom. It then began another major cycle of increase.

The Latest Margin Data

The NYSE margin debt data is about a month old when it is published. The latest debt level is up 2.5% month-over-month and at a record high. Real (inflation-adjusted) debt rose 1.9% month-over-month and also at a record high.

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The next chart shows the percentage growth of the two data series from the same 1995 starting date, again based on real (inflation-adjusted) data. I’ve added markers to show the precise monthly values and added callouts to show the month. Margin debt grew at a rate comparable to the market from 1995 to late summer of 2000 before soaring into the stratosphere. The two synchronized in their rate of contraction in early 2001. But with recovery after the Tech Crash, margin debt gradually returned to a growth rate closer to its former self in the second half of the 1990s rather than the more restrained real growth…
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The "Real" Goods on the March Durable Goods Data

Courtesy of Doug Short.

Earlier today the Census Bureau posted the Advance Report on February Durable Goods New Orders. This series dates from 1992 and is not adjusted for either population growth or inflation.

Let’s now review Durable Goods data with two adjustments. In the charts below the red line shows the goods orders divided by the Census Bureau’s monthly population data, giving us durable goods orders per capita. The blue line goes a step further and adjusts for inflation based on the Producer Price Index for All Commodities, chained in today’s dollar value. This gives us the “real” durable goods orders per capita and thus a more accurate historical context in which to evaluate the conventional reports on the nominal monthly data.

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Economists frequently study this indicator excluding Transportation or Defense or both. Just how big are these two subcomponents? Here is a stacked area chart to illustrate the relative sizes over time based on the nominal data.

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Here is the first chart, repeated this time ex Transportation, the series usually referred to as “core” durable goods.

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And now we’ll exclude both Transportation and Defense for a better look at a more concentrated “core” durable goods orders.

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Here is the chart that gives the most accurate view of what Consumer Durable Goods Orders is telling us about the long-term economic trend. The three-month moving average of the real (inflation-adjusted) core series (ex transportation and defense) per capita helps us filter out the noise of volatility to see the big picture.

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The Trend in Capital Goods

Finally, let’s take a big step back in the sales chain and look at the popular series often referred to as Core Capex — Nondefense Capital Goods New Orders Excluding Aircraft (capital goods are durable goods used in the production of goods or services), shown…
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ECRI Recession Watch: Weekly Update

Courtesy of Doug Short.

Friday’s release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 133.2, up from 132.8 the previous week. The WLI annualized growth indicator (WLIg) is at -1.4, up from the previous week’s -0.7 and well off its interim low of -4.7 in mid-January.

The “Subpar” Recovery

The featured article on the ECRI website is a brief overview of Lakshman Achuthan recent presentation at the 24th Annual Hyman P. Minsky Conference. It includes a PDF link to the full presentation slides and commentary. There is also an embedded audio link to Achuthan’s presentation.

In addition to its many fascinating insights into the economy, the presentation also explains the rationale for ECRI’s recession call in late 2011 and why the recession was ultimately avoided. Highly recommended!

The ECRI Indicator Year-over-Year

Below is a chart of ECRI’s smoothed year-over-year percent change since 2000 of their weekly leading index. The latest level is fractionally lower than it was at the start of the last recession.

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Appendix: A Closer Look at the ECRI Index

The first chart below shows the history of the Weekly Leading Index and highlights its current level.

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For a better understanding of the relationship of the WLI level to recessions, the next chart shows the data series in terms of the percent off the previous peak. In other words, a new weekly high registers at 100%, with subsequent declines plotted accordingly.

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As the chart above illustrates, only once has a recession ended without the index level achieving a new high — the two recessions, commonly referred to as a “double-dip,” in the early 1980s. Our current level is still off the most recent high, which was set back in June of 2007. We’ve exceeded the previously longest stretch between highs, which was from February 1973 to…
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March Durable Goods: A Mixed Bag

Courtesy of Doug Short.

The April Advance Report on March Durable Goods released today by the Census Bureau was a mixed bag. Here is the Bureau’s summary on new orders:

New orders for manufactured durable goods in March increased $9.3 billion or 4.0 percent to $240.2 billion, the U.S. Census Bureau announced today. This increase, up two of the last three months, followed a 1.4 percent February decrease. Excluding transportation, new orders decreased 0.2 percent. Excluding defense, new orders increased 2.6 percent.

Transportation equipment, also up two of the last three months, drove the increase, $9.5 billion or 13.5 percent to $80.3 billion. Download full PDF

The latest new orders headline number at 4.0 percent was well above the Investing.com estimate of 0.6 percent. However, this series is up only 0.7% percent year-over-year (YoY), and if we exclude transportation, “core” durable goods came in at -0.2 percent month-over-month (MoM) and has contracted for six consecutive months.

If we exclude both transportation and defense for an even more fundamental “core”, the latest number was down -0.5 percent MoM, the seventh month of contraction.

The Core Capital Goods New Orders number (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It posted a -0.5% decline and has contracted for seven consecutive months. The downward trend can be attributed to Dollar strength and weakening global demand.

The first chart is an overlay of durable goods new orders and the S&P 500. We see an obvious correlation between the two, especially over the past decade, with the market, not surprisingly, as the more volatile of the two. Over the past year, the market has certainly pulled away from the durable goods reality, something we also saw in the late 1990s.

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An overlay with unemployment (inverted) also shows some correlation. We saw unemployment begin to deteriorate prior to the peak in durable goods orders that closely coincided with the onset of the Great Recession, but the unemployment recovery tended to lag…
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Tech Indices Add To Breakout

Courtesy of Declan.

The Nasdaq broke resistance yesterday, and today the ‘bull trap’ in the index was negated. Trading volume also climbed to register as accumulation, The Nasdaq is market leader against the S&P and Russell 2000; bulls will look for continued money flow into speculative issues to drive the broader rally.


The Russell 2000 also enjoyed a successful day, but it hasn’t yet negated the ‘bull trap.’ Look for a challenge tomorrow, particularly if the Nasdaq can maintain its breakout.


Large Caps didn’t quite post a breakout, but the S&P came close with a challenge on 2,120, also on higher volume accumulation and a return to net bullish technicals.


The Dow remained pegged by 18,100, but has been challenging this level for the past few days. Will tomorrow deliver the breakout?


Large Caps will be leaning heavily on a continuation of today’s rally to deliver the needed breakout, although the indices have been lagging Tech and Small Caps peers for the majority of 2015. While the Nasdaq is leading other indices it hasn’t yet reached the overbought conditions I consider to be a ‘top’ as determined by the relationship of the index to its 200-day MA.

You’ve now read my opinion, next read Douglas’ and Jani’s.





STTG Market Recap Apr 23, 2015

Courtesy of Blain.

After last Friday’s selloff on the China news, this week has been generally quite positive as the earnings parade has been unleashed.  Today was another such day as a slight negative open was bought and the S&P 500 finished up 0.24% and the NASDAQ 0.41%.   New home sales for March came in weaker than expected, at 481,000 in March, versus the 510,000 unit estimate.   Overseas, China’s flash purchasing managers index from HSBC Holdings dropped to 49.2 for April, the lowest since April last year, underscoring a slowdown that prompted China’s central bank to cut banks’ reserve requirements by the most since 2008.  Any reading below 50 signifies contraction.

The NASDAQ has reached new 15 year highs.

spx

nasdaq

The NYSE McClellan Oscillator took a very short detour into the red Friday but has mostly stayed positive this entire month.

NYMO

Pulte Group (PHM) sunk to an S&P index of homebuilders lower by 4.3%, the most since January. The third-largest U.S. homebuilder slid the most in almost two years after reporting profit that missed analyst estimates.

phm

General Motors (GM) closed down 3.3%after the firm delivered quarterly profit and revenue that missed expectations. Weaker volume in Brazil and Russia hurt sales, as well as the impact of weakening currencies in South America due to the strong U.S. dollar.

gm

Based on the after hours action tomorrow should be yet another positive day, especially in the NASDAQ.

Microsoft (MSFT) reported results that trumped estimates as cloud revenue soared, sending its shares 3% higher in after hours.

msft

Google (GOOG) is up nearly 4% in after hours – interesting move because on first glance the report was not stellar.  The company missed earnings and revenue estimates as aggregate cost-per-clicks fell 7 percent, year-over-year.

Consolidated revenue rose to $17.26 billion in the quarter, from $15.42 billion a year earlier. Net income rose to $3.59 billion, or $5.20 per share, from $3.45 billion, or $5.04 per share. Excluding items, the company earned $6.57 per share.  Analysts on average had expected the company to earn $6.60 per share, on revenue of $17.50 billion.  Google’s advertising revenue has been pressured as more consumers access its online services on mobiles devices such as smartphones and tablets, where ad rates are typically lower.

goog   move

Starbucks (SBUX) is up 6% in after hours into the $52s and…
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New Jobless Claims A Bit Higher Than Forecast

Courtesy of Doug Short.

Here is the opening statement from the Department of Labor:

In the week ending April 18, the advance figure for seasonally adjusted initial claims was 295,000, an increase of 1,000 from the previous week’s unrevised level of 294,000. The 4-week moving average was 284,500, an increase of 1,750 from the previous week’s unrevised average of 282,750.

There were no special factors impacting this week’s initial claims. [See full report]

Today’s seasonally adjusted 295K new claims was above the Investing.com forecast of 290K. The four-week moving average at 284,500 is off its interim low of 282,250 set the week ending on April 4th.

Here is a close look at the data over the past few years (with a callout for the past year), which gives a clearer sense of the overall trend in relation to the last recession and the volatility in recent months.

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As we can see, there’s a good bit of volatility in this indicator, which is why the 4-week moving average (the highlighted number) is a more useful number than the weekly data. Here is the complete data series.

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The headline Unempolyment Insurance data is seasonally adjusted. What does the non-seasonally adjusted data look like. See the chart below, which clearly shows extreme volatility of the non-adjusted data (the red dots). The 4-week MA gives an indication of the recurring pattern of seasonal change (note, for example, those regular January spikes).

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Because of the extreme volatility of the non-adjusted weekly data, we can add a 52-week moving average to give a better sense of the secular trends. The chart below also has a linear regression through the data. We can see that this metric continues to fall below the long-term trend stretching back to 1968.

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Annual Comparisons

Here is a calendar-year overlay since 2009 using the 4-week…
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New Homes Sales Disappoint Forecasts

Courtesy of Doug Short.

This morning’s release of the March New Single-Family Homes Sales from the Census Bureau at 481K disappointed expectations, although the sales for the previous month were revised upward. The actual decline was 11.4%. The Investing.com forecast was for 513K sales, which would have been a 5.4% decline from the previous month.

Here is the opening from the report:

Sales of new single-family houses in March 2015 were at a seasonally adjusted annual rate of 481,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.4 percent (±18.6%)* below the revised February rate of 543,000, but is 19.4 percent (±21.8%)* above the March 2014 estimate of 403,000.   [Full Report]

For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed’s FRED repository here.

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Over this time frame we see the steady rise in new home sales following the 1990 recession and the acceleration in sales during the real estate bubble that peaked in 2005.


The Population-Adjusted Reality

Now let’s examine the data with a simple population adjustment. The Census Bureau’s mid-month population estimates show an 70.4% increase in the US population since 1963. The snapshot below is an overlay of the New Home Sales series with a population-adjusted version.

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New single-family home sales are 18.6% below the 1963 start of this data series. The population-adjusted version is 52.3% below the first 1963 sales and at a level similar to the lows we saw during the double-dip recession in the early 1980s, a time when 30-year mortgage rates peaked above 18%. Today’s 30-year rate is below 4%.





Median Household Income Declined in March

Courtesy of Doug Short.

The Sentier Research monthly median household income data series is now available for March. The nominal median household income was down $307 month-over-month but up $1,104 year-over-year. That’s a -0.6% MoM decline and a 2.1% YoY increase. Adjusted for inflation, the latest income was down $436 MoM but up $1,116 YoY. The real numbers equate to a 0.8% monthly increase but a 2.1% yearly increase.

In real dollar terms, the median annual income is 5.3% lower ($3,020) than its interim high in January 2008 but well off its low in August 2011.

Background on Sentier Research

The traditional source of household income data is the Census Bureau, which publishes annual household income data in mid-September for the previous year.

Sentier Research, an organization that focuses on income and demographics, offers a more up-to-date glimpse of household incomes by accessing the Census Bureau data and publishing monthly updates. Sentier Research has now released its most recent update, data through November (available here). The numbers in their report differ from the Census Bureau’s in three key respects:

  1. It is a monthly rather than annual series, which gives a more granular view of trends.
  2. Their numbers are more current. The Census Bureau’s 2013 data will remain its latest until mid-September, 2015.
  3. Sentier Research uses the more familiar Consumer Price Index (CPI) for the inflation adjustment. The Census Bureau uses the little-known CPI-U-RS (RS stands for “research series”) as the deflator for their annual data. For more on that topic, see this commentary.

Monthly Median Household Income Since 2000

The first chart below is an overlay of the nominal values and real monthly values chained in November 2014 dollars. The red line illustrates the history of nominal median household, and the blue line shows the real (inflation-adjusted value). I’ve added callouts to show specific nominal and real monthly values for January 2000 start date and the peak and post-peak troughs.


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In the latest press release, Sentier Research spokesman Gordon Green summarizes the recent data:

“Even though there was an income decline between February and March, there has been a general upward


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Zero Hedge

One Last Look At The Real Economy Before It Implodes - Part 6: Solutions

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Brandon Smith via Alt-Market.com, (click here for Part 1, Part 2, Part 3, Part 4, and ...



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Phil's Favorites

Crash Boys

Michael Lewis explains the flash crash and Navinder Singh Sarao's role in it. Read also: Guy Trading at Home Caused the Flash Crash for background. 

Crash Boys

By  at Bloomberg View

The first question that arises from the Commodity Futures Trading Commission’s case against Navinder Singh Sarao is: Why did it take them five years to bring it?

A guy ...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Kimble Charting Solutions

King Dollar slipping below support, say Joe Friday

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

King Dollar has been on a role since last summer, up over 20% in less than a year. When looking back on the US$, the rally has been rare and nearly historic. Majority of the rally took place inside the steep rising channel above. Over the past month the US$ might have put in a double top. Over the past few days, the US$ has slipped a little below rising support at red arrow above.

CLICK ON CHART TO ENLARGE

As you can see from the table abo...



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Chart School

S&P 500 Snapshot: A Record Close to End the Week

Courtesy of Doug Short.

The pre-market economic news was the release of the March Durable Goods, which had a strong headline number, but Core Capex posted its seventh consecutive decline and is down 4.0% year-over-year. The S&P 500 vacillated in the opening minutes and then trudged higher to its 0.38% intraday record high. The index then moved sideways most of the afternoon before settling for a 0.23% closing gain -- enough for a new all-time record close.

Today the yield on the 10-year Note closed at 1.93%, down three bps from the previous close but above the 1.87% close last Friday.

Here is a 15-minute chart of the week.

Here is a daily snapshot of SPY ETF, which gives a better sense of investor particiaption...



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Digital Currencies

Why Bitcoin's male domination will be its downfall

Here's an interesting argument by Felix Salmon, although I think he is taking two correct observations and mistakenly attributing a cause-and-effect relationship to them: Bitcoin is going nowhere because women are not involved.

More likely, in my opinion, women are not involved in bitcoin because bitcoin is going nowhere (and they know it). Or maybe, simply, bitcoin is going nowhere and women are not involved. 

Why Bitcoin's male domination will be its downfall 

By Felix Salmon

Nathaniel Popper’s new book, Digital Gold, is as close as you can get to being the definitive account of the history of Bitcoin. As its subtitle proclaims, the book tells the story of the “misfits” (the first generation of hacker-l...



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OpTrader

Swing trading portfolio - week of April 20th, 2015

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Sabrient

Sector Detector: Earnings and GDP temporarily take investor spotlight off the Fed

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Sabrient Systems and Gradient Analytics

As we get into the heart of earnings season and anticipate the GDP report for Q1, the investor spotlight has been taken off the Federal Reserve and timing of its first interest rate hike, at least temporarily. Even though Q1 economic growth will undoubtedly look weak, the future remains bright for the U.S economy – even though many multinationals will struggle with top-line growth due to the strong dollar – and any near-term selloff resulting from weak economic or earnings news should be bought yet again in expectation of better results for the balance of the year. High sector correlations remain a concern, reflectin...



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Promotions

Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene

 

The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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Market Shadows

Kimble Charts: South Korea's EWY

Kimble Charts: South Korea's EWY

By Ilene 

Chris Kimble likes the iShares MSCI South Korea Capped (EWY), but only if it breaks out of a pennant pattern. This South Korean equities ETF has underperformed the S&P 500 by 60% since 2011.

You're probably familiar with its largest holding, Samsung Electronics Co Ltd, and at least several other represented companies such as Hyundai Motor Co and Kia Motors Corp.

...



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Mapping The Market

S&P 500 Leverage and Hedges Options - Part 2

Courtesy of Jean-Luc Saillard.

In my last post (Part 1 of this article), I looked at alternative ETFs that could be used as hedges against the corrections that we have seen during that long 2 year bull run. Looking at the results, it seems that for short (less than a month) corrections, a VIX ETF like VXX could actually be a viable candidate to hedge or speculate on the way down. Another alternative ETF was TMF, a long Treasuries ETF which banks on the fact that when markets go down, money tends to pack into treasuries viewed as safe instruments. In some cases, TMF even outperformed the usual hedging instruments like leveraged ETFs. There could of course be other factors at play since some of 2014 corrections were related to geopolitical events which are certain...

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Pharmboy

2015 - Biotech Fever

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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