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Sector Detector: Bulls leverage hopeful news to launch a tepid breakout attempt

Courtesy of Sabrient Systems and Gradient Analytics

Scott MartindaleStocks were able to leverage some optimistic news and dovish words from the Fed to take another stab at an upside breakout attempt last week. Although readers have sometimes accused me of being a permabull, I am really a realist, and the reality is that the slogans like “The trend is your friend” and “Don’t fight the Fed” are truisms. And they have worked. Nevertheless, I am still not convinced that we have seen the ultimate lows for this pullback, especially given the weak technical condition of small caps.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

Bulls got a solid show of support from friends in high places last week. Of course, the biggest drivers of the stock market’s strong performance has been 1) signs of an improving economy, 2) global liquidity provided by dovish central bankers, and 3) global turmoil pushing cautious investors with all that liquidity in their hands into the relative safety and quality of U.S. securities of all types. The FOMC statement on Wednesday indicated no change in the dovish policies and no threat of an imminent move to raise short-term interest rates. ECB quant easing has led to a fall in the British pound and the euro. This has led to a notable strengthening in the U.S. dollar, which has helped keep inflation low, thus giving the Fed room to remain accommodative, which in turn is supportive of elevated valuation multiples in equities.

The 10-year Treasury closed Friday at 2.57%, which is down slightly from the prior week. I still think there is greater downside potential in the 10-year yield, especially given global liquidity and the resulting demand for the safety of U.S. Treasuries. Inflation is hard to find, and many economies around the world are trying to stave off recession and deflation (including Europe and Japan). Low interest rates could be with us for a while.

After 5.5 years of a liquidity-fueled bull market, many observers are saying the market is getting long in…
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Sector Detector: Bulls go down swinging, refusing to give up much ground

Courtesy of Sabrient Systems and Gradient Analytics

Although the stock market displayed weakness last week as I suggested it would, bulls aren’t going down easily. In fact, they’re going down swinging, absorbing most of the blows delivered by hesitant bears. Despite holding up admirably when weakness was both expected and warranted, and although I still see higher highs ahead, I am still not convinced that we have seen the ultimate lows for this pullback. A number of signs point to more weakness ahead.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

The Dow Jones Industrials, S&P 500, and NASDAQ all broke their string of five weekly gains, even though the bulls were reluctant to give up much ground. We are now halfway through the historically weak month of September, including the always worrisome 9/11 anniversary, and so far the bulls have shown little inclination to throw in the towel. Somewhat surprisingly given overall market weakness, traditionally-defensive sector Utilities was the weakest sector last week. Energy and Basic Materials were also weak, while Healthcare held up the best. With the yield on the 10-year U.S. Treasury closing Friday at 2.61%, we have seen some weakening in Treasuries, and thus in higher-yielding Utilities stocks, as well. Also, the U.S. REIT index fell 3%.

All eyes will be on Wednesday afternoon’s FOMC policy statement and their current sentiment regarding interest rates. I still think there is greater downside potential in the 10-year yield, especially given global liquidity and the resulting demand for the safety of U.S. Treasuries. Moreover, ECB quant easing has led to a fall in the British pound and the euro. This has led to a notable strengthening in the U.S. dollar, which has helped keep inflation low, thus giving the Fed room to remain accommodative, which in turn is supportive of elevated valuation multiples in equities.

Nevertheless, although I expect the market to finish the year higher than it is now, there are plenty of reasons to be concerned about near-term market weakness. For example, according to the…
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First Trust Rolls Out Active Long-Short ETF

Courtesy of Sabrient Systems and Gradient Analytics

First Trust, the sixth-largest U.S. issuer of exchange traded funds, will introduce the First Trust Long/Short Equity ETF (NYSEArca: FTLS). The new actively managed ETF can take long and short positions in U.S. and international equities, using earnings quality as a primary determinant of stock selection.  Read ETF Trends article.





First Trust Rolls Out Active Long-Short ETF

Courtesy of Sabrient Systems and Gradient Analytics

[From article by Tom Lydon at ETFTrends.com]

First Trust, the sixth-largest U.S. issuer of exchange traded funds, will introduce the First Trust Long/Short Equity ETF (NYSEArca: FTLS).

The new actively managed ETF can take long and short positions in U.S. and international equities, using earnings quality as a primary determinant of stock selection. FTLS will establish long positions in stocks deemed to have high earnings quality while short positions will be implemented in low earnings quality names. Read article.





Sector Detector: Stock market breakout? Not so fast

Courtesy of Sabrient Systems and Gradient Analytics

Scott MartindaleWas that really a breakout? With the S&P 500 struggling around the 2,000 level for the past two weeks, Friday’s strong finish might seem like a bullish breakout. But the market has already given us a couple of false breakouts at this level, and although I see higher prices ahead, I’m still not convinced that we have seen all the near-term downside that Mr. Market has in store, particularly given we are now in the historically weak month of September. Also, the improving economy is a double-edged sword from an equity investor’s perspective as they are concerned that the Fed might feel the need to raise rates sooner than currently planned.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

Yes, we are entering the historically weakest month of September, at least according to Stock Trader’s Almanac. However, the reality is that the average monthly loss is only -0.5%, and nearly half of the time the market finishes positive. Moreover, recent performances have bucked the averages, with solid gains in September the past two years and a robust +8.8% in 2010.

There is no doubt that the U.S. economy is strengthening while central banks flood world markets with liquidity, and global investors look to U.S. stocks and Treasuries for the unusual combination of more safety and higher returns. Hiring has surged starting with lower wage jobs but also with the expectation that higher wage jobs will soon follow. Corporate profits are at record highs and stock buybacks are raging. Also, oil prices have fallen as domestic production continues to rise. The European Central Bank has joined the other major central banks in lowering interest rates and launching its own version of quantitative easing, and much of that new liquidity should find its way into the relative safety of U.S. stocks and Treasuries.

And don’t forget, hedge funds are finding themselves way underweight in equities. After the ECB announced its stimulus program, David Tepper of hedge fund Appaloosa Management predicted that this signals…
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Six Companies Push Tax Rules Most

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

Courtesy of Sabrient Systems and Gradient Analytics

Gradient Senior Analyst Nicholas Yee reports on six companies that are using a variety of techniques to shift pretax profits to lower-tax areas. Featured in this USA Today, article, the companies include CELG, ALTR, VMW, NVDA, LRCX, and SNPS.

Six Companies Push Tax Rules Most

Excerpt:

Nobody likes to pay taxes. But some companies are taking cutting their tax bills to an art form that might be impossible to maintain long term, according to a report by Gradient Analytics.

Gradient Analytics’ analyst Nicholas Yee found six companies, including Celgene (CELG)Altera (ALTR)VMware (VMW)Nvidia (NVDA)Lam Research (LRCX) and Synopsys (SNPS) are using a variety of techniques to shift pretax profits to lower-tax areas, which are aggressive enough that they could attract attention from tax rule makers. Others have gotten tax benefits that are ending or already face Internal Revenue Service reviews.

There’s nothing necessarily nefarious about companies looking for ways to cut their taxes. But investors are growing increasingly interested in whether U.S. tax authorities will look to curb some of the techniques that are being used by companies. The fear is that some companies’ earnings could be at risk if tax policy makers invalidate tax-reduction techniques used, Yee says.

Read more here





Sector Detector: Up next for bulls, a big test of conviction

Courtesy of Sabrient Systems and Gradient Analytics

Bulls are having their way as summer draws to a close. Indeed, U.S. stocks and bonds seem to be the best and safest place to invest in a global economy that is at once hopeful and cautious, with lots of available cash hunting for attractive returns. But now the S&P 500 must deal with the ominous 2,000 level.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

Bullish investors continue to ride the way of improved hiring, rising corporate earnings, and a dovish Fed (along with other central banks around the world). Looking at the ten U.S. business sectors, last week was definitely a good time to be long the economically sensitive sectors. Technology was far-and-away the leader for the week, while Telecom was the worst. Other top performers included Consumer Services/Discretionary, Financial, and Industrial. The CBOE Market Volatility Index (VIX), a.k.a. fear gauge, closed Friday at 11.47 and is trending downward.

U.S. Treasuries continue to enjoy strong demand, as well, even while the Fed continues to taper its bond buying activity. The 10-year yield fell even further last week, closing Friday at 2.40%, which is up only slightly from the prior Friday. Again, the strength in Treasuries is reflecting global investors seeking the relative safety of the U.S., given all the global uncertainties, European malaise, and violent hot spots, as well as an expectation that the Fed likely will not raise interest rates any time soon.

SPY chart review:

The SPDR S&P 500 Trust (SPY) closed last Friday at 199.19, which again is up nicely from the prior Friday as the market essentially has gone straight up after finding strong support at its 100-day simple moving average. SPY paused as it retook its 50-day SMA, and now is dealing with the psychologically daunting 200 level. With such low volume, bulls have not had to overcome any significant bearish roadblocks, but the challenge this week will be recruiting enough new bullish capital to break through 200. Additional support levels are nearby,…
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Sector Detector: Bullish investors jockey for position as if the correction is over

Courtesy of Sabrient Systems and Gradient Analytics

Scott MartindaleAs many investors enjoy the final weeks of summer, some optimistic bulls seem to be positioning themselves well ahead of Labor Day in anticipation of a fall rally. Indeed, last week’s action was impressive. After only a mere 4% correction, investors continued to brush off the disturbing violence both at home and abroad, and they took the minor pullback as their next buying opportunity. But was that really all the pullback we’re going to get this year? I doubt it. But I also believe that nothing short of a major Black Swan event can send this market into a deep correction.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

Looking at the ten U.S. business sectors, Technology, Utilities, and Healthcare each had a good week last week and are still the leaders year-to-date, while Energy fell back a tad. Notably, Basic Materials continues to show new life and is pulling away from the pack at the lower end of the performance scale — Industrial, Financial, Consumer Goods/Staples, Consumer Services/Discretionary, and Telecommunications.

U.S. Treasuries continue to enjoy strong demand, even while the Fed continues to taper its bond buying activity. The 10-year yield fell even further last week, closing Friday at 2.34%, and the 30-year last checked in at 3.13%. Again, the strength in Treasuries is reflecting global investors seeking the relative safety of the U.S., given all the global turmoil, as well as an expectation that the Fed likely will not raise interest rates any time soon. Low rates entice business to borrow for expansion, hiring, and stock buybacks, and they support higher equity valuation multiples when low bond yields (and a low discount rate) are compared with future earnings in equities discounted back to a present value.

The CBOE Market Volatility Index (VIX), a.k.a. fear gauge, closed Friday at 13.15. During the recent market pullback, VIX had spiked above 17, but soon fell back to as low as 12 on Friday morning during the early continuation of the market rebound.…
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Sector Detector: August consolidation offers chance to buy top stocks from top sectors

Courtesy of Sabrient Systems and Gradient Analytics

Stocks saw elevated volume and volatility last week, and the 100-day simple moving average on the S&P 500 proved to be the proverbial line-in-the-sand for bullish investors. I opined last week that the market seemed to have sufficiently cycled back down to oversold territory, so with a little more technical consolidation and successful testing of nearby support levels, the next move higher could easily commence at any time. So, the question remains as to whether that was the big new buying opportunity, or whether more backing-and-filling is needed. Personally, I would prefer to see a successful test of the 200-day SMA, but the market might not be so generous.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

U.S. Treasuries continue to enjoy strong demand. The 10-year yield fell even further this week, closing Friday at 2.42%. So, the bond market is telling us that the Fed will not raise interest rates in the near term. However, high-yield corporate bonds, which have enjoyed a multi-year bull run as income investors have taken on risk in search of higher yields, saw accelerated losses last week. According to Bank of America Merrill Lynch, total dollar outflows last week were the largest ever and the fourth largest as a percentage of AUM. So, all in all, bonds displayed risk-off activity, which of course should be no surprise.

Of course, overbought technical conditions combined with frightening geopolitical turmoil have made equity investors hesitant. And then there was the $100 billion in M&A that suddenly collapsed last Tuesday when the Twenty-First Century Fox (FOX) acquisition of Time Warner (TWX) and the Sprint (S) bid for T-Mobile US (TMUS) both fell apart. Nevertheless, M&A and stock buybacks remain robust — and are expected to continue as such.

And Friday saw quite a resumption in bullish sentiment, with green across the board. In fact, all 13 of Sabrient’s Baker’s Dozen top stocks for 2014 finished the day positive. Interestingly, the five leaders in the portfolio on Friday were those…
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Sector Detector: Patient bulls finally get a new entry point, thanks to inflation fears

Courtesy of Sabrient Systems and Gradient Analytics

Now that’s what I’m talking about. I have been discussing the overbought technical conditions of the S&P 500 for some time and the need for a pullback to test bullish support levels. And as many commentators have suggested, the more time between pullbacks, the more severe is the action when it finally arrives. Bears had become very hungry after a prolonged hibernation. This week offered up a nasty pullback. But fear not, because in my view it was just what the doctor ordered for the bulls to recruit new troops in order to have a chance at breaking through some ominous resistance levels.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

Once Fed Chairwoman Yellen mentioned a little something about inflation, bulls got spooked, and of course a little fear at overbought levels can snowball in short order. The stock market is a discounting mechanism in that the theoretical fair value in a discounted cash flow model is the sum of future earnings discounted back to a present value. So, if inflation starts to creep up, there would be pressure on the Federal Reserve to increase the discount rate, which would make it harder to support elevated multiples. Moreover, it would make corporate borrowing for stock buybacks or capital investment less attractive. Thus, the kneejerk reaction. This further underscores the need for economic expansion and rising corporate earnings (as well as rising revenues) to support valuations. So far, earnings season has been pretty good, and of course Q2 GDP smoked all predictions by clocking in at a robust +4%, while the dismal Q1 rate was revised upward.

Wage inflation is the necessary precursor to price inflation, and reports showed that U.S. labor costs in Q2 recorded their biggest gain in more than five years. Argentina defaulting on its sovereign debt and increasingly severe sanctions on Russia didn’t help investor psyche, either. On Friday, unemployment ticked up to 6.2% (even though many observers thought it might drop below 6%), most likely due to…
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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!

 
 

Zero Hedge

Bread, Circuses, & Bombs - Decline Of The American Empire

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Jim Quinn via The Burning Platform blog,

“Already long ago, from when we sold our vote to no man, the People have abdicated our duties; for the People who once upon a time handed out military command, high civil office, legions — everything, now restrains itself and anxiously hopes for just two things: Bread and Circuses.” – Juvenal &nda...



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Chart School

Minimum Volatility Stocks: Out-Of-Sample Performance of iM's Best12(USMV)

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

The backtest reported in a previous article showed that ranking the holdings of USMV, the iShares MSCI USA Minimum Volatility ETF, and selecting a portfolio of the 12 top ranked stocks, provided higher returns for the portfolio than for the underlying ETF. To test these findings out-of-sample we launched the Best12(USMV)-July-2014 model on Jun-30-2014 and published the holdings on our website then. So far this portfolio has gained 8.2%, while USMV is up a mere 2.2%. This test will be expanded by the launch of the second ...



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Phil's Favorites

"This Is About As Good As Things Are Going To Get For The Middle Class"

 

"This Is About As Good As Things Are Going To Get For The Middle Class"

Courtesy of Michael Snyder of The Economic Collapse

The U.S. economy has had six full years to bounce back since the financial collapse of 2008, and it has not done so.  Median household income has declined substantially, total household wealth for middle class families is down, the percentage of the population that is employed is still about where it was at the end of the last recessi...



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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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Sabrient

Sector Detector: Bulls leverage hopeful news to launch a tepid breakout attempt

Courtesy of Sabrient Systems and Gradient Analytics

Stocks were able to leverage some optimistic news and dovish words from the Fed to take another stab at an upside breakout attempt last week. Although readers have sometimes accused me of being a permabull, I am really a realist, and the reality is that the slogans like “The trend is your friend” and “Don’t fight the Fed” are truisms. And they have worked. Nevertheless, I am still not convinced that we have seen the ultimate lows for this pullback, especially given the weak technical condition of small caps.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector ...



more from Sabrient

OpTrader

Swing trading portfolio - week of September 22nd, 2014

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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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the latest issue of Stock World Weekly. Enjoy! Please sign in using your PSW user name and password. (Or take a free trial.)

...

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Option Review

IV Implodes On 4-hour YHOO Options As BABA Commences Trading

Investors are dumping shares in Yahoo, sending the stock down 5.0% to $40.08 after shares in Alibaba made their debut on the floor of the NYSE just before midday. Shares in BABA for their part initially traded up to a high of $99.70, a near 47% increase over the IPO price of $68.00. Typically, one would expect put options that are 5% out of the money with roughly 4-hours left to trade to see waning implied volatility. But, at the start of the trading session and ahead of the first trade for BABA, the Sep 19 ’14 40.0 strike put options were trading with 271% volatility or $0.30 per contract amid uncertainty as to how the start of trading for Alibaba would take shape.

...

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Market Shadows

Selling PVD

Selling PVD

Administradora de Fondos de Pensiones Provida S.A. (PVD) shares will not be trading on the NY Stock Exchange after today. Tomorrow, shares will be harder to sell. Strangely, I wasn't able to find information on the internet, but Paul just sent me a copy of the email he received from Interactive Brokers.

We're selling PVD out of the Virtual Portfolio today at $87.18. 

More details:

From: Interactive Brokers   dated July 18, 2014

Holders of AFP Provida S.A. American Depository Receipts (ADR) are advised that the Company has elected to terminate the Deposit Agreement effective 2014-09-18.

As of the te...



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Promotions

Last Chance! See The 'Google-Like' Trading Algorithm 'Live' TODAY

Traders and Investors,

RSVP NOW to attend a special presentation TODAY at Noon or 9:00 pm ET, where you’ll see a powerful trading algorithm that’s been tested and proven to return phenomenal results on a consistent basis. 

In fact, it has an 82% win rate…

And had you only traded the conservative alerts recommended by the algorithm since inception, you would have experienced portfolio gains of more than 200%!

Register NOW and secure your virtual seat for one of Today’s LIVE presentations.

When you register for the webinar, you’ll also get instant access to following trading videos:

  • Instant access to FOUR Quick-Start Expectancy...


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Digital Currencies

Making Sense of Bitcoin

Making Sense of Bitcoin

By James Black at International Man

Despite the various opinions on Bitcoin, there is no question as to its ultimate value: its ability to bypass government restrictions, including economic embargoes and capital controls, to transmit quasi-anonymous money to anyone anywhere.

Opinions differ as to what constitutes "money."

The English word "money" derives from the Latin word "moneta," which means to "mint." Historically, "money" was minted in the form of precious metals, most notably gold and silver. Minted metal was considered "money" because it possessed luster, was scarce, and had perceive...



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Pharmboy

Biotechs & Bubbles

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

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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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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