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Archive for the ‘Chart School’ Category

S&P 500 Snapshot: Fed Induced Bipolar Disorder

Courtesy of Doug Short.

With yesterday’s dovish duo Bullard and Dudley to set expectations, the S&P 500 rallied in anticipation of Chairman Bernanke’s congressional testimony and soared to its all-time intraday high, up 1.07% during his prepared remarks. But the Q&A deflated the balloon, and the 2 PM release of the latest Fed Minutes accelerated the decline. It seems that the possibility of tapering QE in the near term is not entirely off the table. The index hit its -1.23% intraday low about 30 minutes before the final bell. It then trimmed its loss to close down 0.83%. The 10-year yield jumped 9 bps to close at 2.03%, just off the 2013 interim high of 2.07% on March 11th and 37 bps off its 2013 low set 14 sessions back.

Here is a 15-minute look at the week so far.

Not surprisingly the volume on today’s 2.32% high-low intraday range was 24% above its 50-day moving average.

The S&P 500 is now up 16.07% for 2013 and 0.83% below the all-time closing high set yesterday.

 

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For a better sense of how these declines figure into a larger historical context, here’s a long-term view of secular bull and bear markets in the S&P Composite since 1871.

 

 

 

 





Bernanke’s Semi-Annual Tap-Dance of Distortions, Half-truths, Lies, and Hypocrisy to Congress

Courtesy of Doug Short.

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


Inquiring minds with extra time on their hands this morning are plodding through the Full Transcript of Bernanke’s Testimony To Joint Economic Committee, U.S. Congress looking for the usual collection of half-truths, distortions, and outright lies it usually contains.

Here are some point-by-point statements by Bernanke with my comments immediately following each set of statements.

Bernanke: Conditions in the job market have shown some improvement recently. The unemployment rate, at 7.5 percent in April, has declined more than 1/2 percentage point since last summer. Moreover, gains in total nonfarm payroll employment have averaged more than 200,000 jobs per month over the past six months, compared with average monthly gains of less than 140,000 during the prior six months.

Mish: What Bernanke failed to say is real wages are anemic and the Fed’s low interest rate policy is making it easy for corporations to borrow at excessively low rates and use the money to invest in hardware and software robots to fire workers. Excessively low rates also punish savers and those on fixed income.

Bernanke: Payroll employment has now expanded by about 6 million jobs since its low point, and the unemployment rate has fallen 2-1/2 percentage points since its peak.

Mish: Even if those were all full-time jobs, this was a very anemic recovery by historic standards.

Bernanke: Despite this improvement, the job market remains weak overall: The unemployment rate is still well above its longer-run normal level, rates of long-term unemployment are historically high, and the labor force participation rate has continued to move down. Moreover, nearly 8 million people are working part time even though they would prefer full-time work. High rates of unemployment and underemployment are extraordinarily costly: Not only do they impose hardships on the affected individuals and their families, they also damage the productive potential of the economy as a whole by eroding workers’ skills and--particularly relevant during this commencement season--by preventing many young people from gaining workplace skills and experience in the first place.

Mish: That is a reasonably accurate set of statements but nowhere does the Fed admit its role in creating those conditions with its boom-bust, moral-hazard monetary policies.

Bernanke: The loss of output and earnings associated with high unemployment also reduces government…
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Today’s Market and Economists’ Forecasts for 10-Year Yields and the FFR

Courtesy of Doug Short.

As I type this, the market is exhibiting some bipolar disorder following multiple doses of Fed speak: Yesterday Bullard’s presentation in Germany and Dudley’s speech in New York, and today Bernanke’s congressional testimony at 10 AM and the latest Fed Minutes at 2 PM.

Amidst the market confusion, I took a few minutes to review the Wall Street Journal’s May survey of economists to see what they had forecast for the 10-year yield and the Fed Funds Rate out to December 2015. The survey was conducted May 3-7 and 48 economists responded, although some omitted responses to some questions.

The bond market is a few minutes from closing. A peak at Bloomberg shows the 10-year yield at 2.02 percent. Thus far in 2013 the closing low was 1.66 (twice, on May 1st and 2nd) and the closing high was 2.07 on March 11. The first chart shows the economists forecast for the yield at the end of June. I’ve used a 6 percent vertical scale for all charts to help us visualize the comparisons.

Here’s what they forecast for the end of 2015 (note that fewer were willing to take a stab that far out).

The survey sought responses at six-month intervals. This table shows the high, low, median (middle) and average forecasts and the number of responses for the six periods.

Of course, a key driver for yield expectorations is what the Fed is doing with the Fed Funds Rate. The current set rate is 0-0.25 percent with the latest effective rate of late hovering around 0.10. Here’s what the economists expect at the end of 2015.

Here is a side-by side showing the high, low and median for the 10-year yield and FFR.

For the past few months the market has been trading as if QE and Zero Interest Rate Policy would continue seemingly indefinitely. And Japan’s Abenomics has no doubt supported this mindset. Yesterday’s dovish presentations by Bullard and Dudley and the written testimony of Bernanke today gave the impression that the Fed was in no hurry to taper QE. But Bernanke, as a CNBC pundit interviewing Bill Gross, put it “spoke from both sides of his mouth.” And the Fed minutes certainly included talk…
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Today’s Dow Now in Third Place

Courtesy of Doug Short.

Here is the latest look at the “Sweet Sixteen” Dow recoveries adjusted for inflation/deflation I’ve been illustrating from time to time over the past three years. The charts below compare the current Dow recovery since the March 2009 low with fifteen other major recoveries dating from the origin of this legendary index in 1896. (See the footnote for my selection criteria.)

At this point the Dow is 1058 market days beyond the 2009 low. The last time I checked, in early April, the index was in fourth place in our Sweet Sixteen competition and 11.5% below the recovery from the 1982 low over the equivalent time frame. Now, 30 sessions later, the current level has a nominal gain of 135.0% since the 2009 trough, and is currently at a new all-time high. However, since we’re comparing such a diverse set of market eras with such a wide patterns of inflation/deflation, the real numbers provide greater comparative insights.

 

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The two rallies with higher real gains at the equivalent post-trough point were the troughs in 1932 and 1921 (see the table below).

Why is inflation adjustment useful for this overlay? Throughout history the cost of living has undergone some dramatic changes, as this chart illustrates. High inflation, such as during the 1974 recovery, gives an exaggerated sense of price growth. Deflation, which accompanied several of the earlier market cycles, makes recoveries appear weaker. By adjusting for the inflationary/deflationary cycles, we get a clearer sense of the real value of the index price across time.

Now let’s extend the time frame. Here is a set of charts with increasing numbers of market days: 500, 1000, 2000, 3000, 4000, and 5000. Depending on the historical period, the number of market days in a year varies slightly. But it rounds out to about 250 market days per year. So the time frames in this series are approximately 2, 4, 8, 12, 16, and 20 years. The series features the 500-day chart with and without the 1932 recovery, which was a quite an outlier. At 1000 market days, the 1932 recovery continues to lead the…
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Gasoline Volume Sales, Demographics and our Changing Culture

Courtesy of Doug Short.

The Department of Energy’s Energy Information Administration (EIA) data on volume sales is over two months old when it released. The latest numbers, through mid-March, were published today. However, despite the lag, this report offers an interesting perspective on fascinating aspects of the US economy. Gasoline prices and increases in fuel efficiency are important factors, but there are also some significant demographic and cultural dynamics in this data series.

Because the sales data are highly volatile with some obvious seasonality, I’ve added a 12-month moving average (MA) to give a clearer indication of the long-term trends. The latest 12-month MA is 8.2% below the all-time high set in August 2005. We are fractionally above the interim low of 8.3% below the high set two months ago in the December report.


 

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The next chart includes an overlay of monthly retail gasoline prices, all grades and formulations. I’ve shortened the timeline to start with EIA price series, which dates from April 1993. The retail prices are updated weekly, so the price series is the more current of the two.

 

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As we would expect, the rapid rise in gasoline prices in 2008 was accompanied by a significant drop in sales volume. With the official end of the recession in June 2009, sales reversed direction … slightly. The 12-month MA hit an interim high in November 2010, and then resumed contraction. The moving average for the latest month (March 2013) is about 7.9% below the pre-recession level and 4.8% off the November 2010 interim high. For some historical context, the latest data point is a level first achieved going on fifteen years ago, in June 1998.

Some of the shrinkage in sales can be attributed to more fuel-efficient cars. But that presumably would be minor over shorter time frames and would be offset to some extent by population growth. Also, if we look at Edmunds.com for data on the…
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S&P 500 Snapshot: Fractional Gain to a New High

Courtesy of Doug Short.

Another day of no economic data left the markets looking for cues. The Nikkei closed with a fractional gain of 0.13%, and the EURO STOXX 50 slipped a fractional 0.10%. So today’s focus was on couple of the more dovish Fed presidents, Bullard and Dudley. For an interesting visual of the Fed Presidents on the Dove-Hawk scale, see this graphic from Thomson Reuters. Bullard’s presentation is available here. Dudley’s speech is available here. But of course it’s Bernanke’s testimony to Congress tomorrow that will be the main event for Fed watchers. The S&P 500 traded in in a 0.74% range from an intraday low of -0.21% this morning to an intraday high this afternoon of 0.52%. The index closed the day with a trimmed gain of 0.17%. But any positive number was destined to be a new all-time high.

Here is a 10-minute look at the week so far.

Volume today was 5% below its 50-day moving average.

The S&P 500 is now up 17.04% for 2013.

 

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For a better sense of how these declines figure into a larger historical context, here’s a long-term view of secular bull and bear markets in the S&P Composite since 1871.

 

 

 

 





Chained CPI Versus the Standard CPI: Breaking Down the Numbers

Courtesy of Doug Short.

Note from dshort: I’ve updated this commentary to include the April Consumer Price Index data published last week.


The Consumer Price Index for Urban Consumers (CPI-U, or more generally CPI) is the most familiar gauge of inflation in the US. The data for the non-seasonally adjusted series stretches back a century to January 1913. But the news of late is about a relative newcomer to the inflation metrics of the Bureau of Labor Statistics (BLS), the Chained CPI for Urban Consumers (C-CPI-U). The BLS has a Frequently Asked Questions page on the Chained CPI that’s been around for a while. At present the page footer says “Last Modified Date: April 6, 2005″.

The reason the Chained CPI has been a hot topic in the news is that it’s being proposed as the method for determining cost of living adjustments for Social Security. Here are some typical examples of topic in the popular press:

For a snapshot comparison of how the conventional CPI and Chained CPI stack up against each other, I’ve created a variation on the CPI chart I’ve been updating monthly for the past several years here. The chart illustrates the overall change in inflation for CPI, Core CPI, and the eight top-level components of CPI since the turn of the century (more here). I also include energy, which is a collection of subcomponents, and College Tuition and Fees, a subcomponent of one of the top eight.

The BLS has published the data for these metrics for chained CPI from December 1999. The one missing element is College Tuition and Fees, a subcomponent of Education and Communication. The chart below pairs the two versions of each component showing the total change since December 1999. We can thus have a more educated sense of how the Chained CPI and conventional CPI differ from one another.

 

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19 Out Of 19

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

The Dow completes its 19th week in a row with a green close on a Tuesday – there are no superlatives left. As a gentle reminder, since February 1st, the Dow has gained 9.85%; absent Tuesdays it is up a mere 0.5%. Despite equity strength, bonds rallied, VIX rallied, the USD ranged violently (Fed's Bullard and Dudley) to end unchanged, and commodities drifted lower on another dismally low volume day. Correlations between stocks and the rest of risk-assets have completely broken down today.

19-in-a-row…

 

It's been a hell of a six months on Tuesdays…

 

Treasuries did not buy into the rotation…again…

 

VIX futures roll tomorrow and likely had some effect (and we saw notable volume in higher up calls – though more like rolls than outrights) but VIX remains absolutely agnostic of the last 40 SPX points…

 

FX markets ended the day oddly unchanged – despite some very notable swings on the back of Fed's Bullard and Dudley's comments…

 

Commodities in general drifted lower today…

 

Stocks (once again) were in a world of their own for much of the post-EU close… cross-asset-class correlations completely disappeared this afternoon as stocks wee notably bid beyond every other risk asset

 

Charts: Bloomberg and Capital Context

Bonus Chart: A Gentle reminder… SPY is 6 sigma rich to HYG (arb delta is around 3xHYG vs 1xSPY)






Two Measures of Inflation: New Update

Courtesy of Doug Short.

Note from dshort: I’ve updated the accompanying charts with the latest Consumer Price Index data from the Bureau of Labor Statistics. The annualized rate of change is calculated to two decimal places for more precision in the side-by-side comparison with the PCE Price Index.


The BLS’s Consumer Price Index for April, released last week, shows core inflation below the Federal Reserve’s 2% long-term target range at 1.72%. Core PCE, at the end of last month, is significantly lower at 1.13%. The Fed is on record as preferring Core PCE as its inflation gauge.

The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s statutory mandate. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee’s ability to promote maximum employment in the face of significant economic disturbances. [Source]
Note: Bolding added by me.

Elsewhere the Fed stresses the importance of longer-term inflation patterns, the likelihood of persistence and the importance of “core” inflation (less food and energy). Why the emphasis on core? Here is an excerpt from one of the Fed FAQs.

Finally, policymakers examine a variety of “core” inflation measures to help identify inflation


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Fed Failing to Inflate the Economy? Deflation Ahead?

Courtesy of Doug Short.

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


The Fed is pumping billions into the economy every month, hoping to inflate the economy. From a stock market perspective, many key indexes are at all-time high levels. Is the Fed succeeding to inflate stocks? Many would say yes.

From a broad based Commodity perspective (CRX Index), higher prices are not taking place.

In fact the opposite is the case, as the CRX index below has been created a series of lower highs since May of 2011, and the CRX index is down 18% from two years ago this month. These lower high could well be forming a “Descending Triangle” which the majority of the time suggests lower prices are ahead.

 

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Velocity is a ratio of nominal GDP to a measure of the money supply. It can be thought of as the rate of turnover in the money supply — that is, the number of times one dollar is used to purchase final goods and services included in GDP

Velocity peaked back in 2000 and is now is at its lowest levels in 50-YEARS! The CRX peaked back in 2008 and may be forming a “Descending Triangle” over the past 5-years. This pattern the majority of the time suggests lower prices are ahead.

If this resistance lines holds at (3) in the top chart and the CRX starts falling in price, it would be suggesting deflation is about to pick up speed, despite the massive money printing by the Fed!

The best news for the global economy would be the CRX breaking resistance, reflecting global commodity strength. Watch the CRX in the next couple of months; it will tell us a ton about the status of the world’s economy and the Fed’s attempt to inflate!


For information about Kimble Charting Solutions, send an email to services@kimblechartingsolutions.com.

 

 

 

 





 
 
 

Sabrient

Sector Detector: Fed tries to refill bulls’ fuel tank as cyclicals lead

Courtesy of Sabrient Systems and Gradient Analytics

The market went through some gyrations on Wednesday in reaction to Fed Chairman Bernanke’s testimony before the Joint Economic Committee. He first defended continued quant easing by warning, “A premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery.” Stocks dutifully rallied and all major indexes hit new intraday highs.

But alas, consensus is apparently not a given over the longer term. The minutes hinted that a tapering off could start sooner, “A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth.” So …...



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Zero Hedge

Japanese Stocks Plunge 1000 Points - Biggest Drop In 26 Months

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

UPDATE: They are paniccing... BOJ injected 2 trillion yen ($19.4 billion) into the financial system to stem volatility following a circuit breaker in JGB futures trading.

All the time it is just the quadrillion JPY second-largest bond market in the world that is experiencing volatility on an unprecedented scale, the BoJ and her partners in crime are more than willing to 'officially' say "please do not worry." But when the equity market - that barometer of everything good and holy about Abenomics starts to crater, you can bet the excuses will co...



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Insider Scoop

Long Setup in Herbalife Still Attractive; Stock Breaks Out as New Auditor Hired

Courtesy of Benzinga.

Few stocks have attracted more news over the last six months than nutritional supplement maker Herbalife (NYSE: HLF).

Even casual market observers are aware of the circumstances surrounding the the initial bout of extreme volatility in the name back in December 2012. The shares went into free-fall at the end of the year after hedge fund manager Bill Ackman revealed in typical sanctimonious fashion that his firm Pershing Square Capital Management was short around $1 billion worth of the stock.

Amid much pomp and circumstance, Ackman laid out his short thesis at a New York investment conference and...



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Phil's Favorites

Most investors underperform their already underperforming funds

Interesting article by Joshua Brown on investors performing worse than the funds they trade in and out of. It's the same principle at play that Paul Price describes in his article: March Madness and Your Trading Decisions

Most investors underperform their already underperforming funds

Courtesy of 

At my shop we spend more of our time thinking about how we can succeed through behavior rather than through trying to find the next hot stock or fund manager.

We're always fascinated by those who choose the other, less rational route and we ...



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Option Review

Big Volume In Saks Options As Shares Rip Higher

 

Today’s tickers: SKS, USG & PFE

SKS - Saks, Inc. – Timely bullish bets initiated in Saks options just seconds prior to the closing bell on Tuesday are generating sizable gains for at least one trader today, with shares in the high-end retailer up at the highest level since 2008. The stock closed Tuesday up 11% on the day at $13.67 after the company reported first-quarter revenue above average analyst expectations. Within minutes of the close shares in SKS moved sharply to the upside after the New York Post, citing a source familiar with the matter, reported...



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Chart School

S&P 500 Snapshot: Fed Induced Bipolar Disorder

Courtesy of Doug Short.

With yesterday's dovish duo Bullard and Dudley to set expectations, the S&P 500 rallied in anticipation of Chairman Bernanke's congressional testimony and soared to its all-time intraday high, up 1.07% during his prepared remarks. But the Q&A deflated the balloon, and the 2 PM release of the latest Fed Minutes accelerated the decline. It seems that the possibility of tapering QE in the near term is not entirely off the table. The index hit its -1.23% intraday low about 30 minutes before the final bell. It then trimmed its loss to close down 0.83%. The 10-year yield jumped 9 bps to close at 2.03%, just off the 2013 interim high of 2.07% on March 11th and 37 bps off its 2013 low set 14 sessions back.

Here is a 15-minute look at the week so far.

Not surprisingly the volume on today's 2.32% high-low intraday range was 24% above its 50-day movi...



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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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Market Montage

More History

Submitted by Mark Hanna

Courtesy of MarketMontage. View original post here.

Doing a lot of data mining as we watch this market go parabolic.

The S&P 500 is 13.4% over the 200 day moving average.  10%+ is considered overbought, and 12% is very rare.

The current Relative Strength Index (RSI) on the S&P 500 is 75.  Over 70 is generally overbought (below 30 oversold).  To put in perspective in 1999 the S&P touched 70ish a few times but never hit 75.   The NASDAQ in 1999 – early 2000 hit mid 70s a few days in July 99 and Mar 00.  Then in the parabolic move in November and December 1999 (NASDAQ gained over 1000 pts!) it sat between 70 and mid 80s for most of two months; of course t...



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OpTrader

Swing trading portfolio - week of May 20th, 2013

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

Optrader 

...

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Stock World Weekly

Stock World Weekly

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

Here's the latest Stock World Weekly! Just sign in with your PSW user name and password, or sign up to try it out. 

...

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IRA Strategy/Income Trader

The IRA portfolio

Reminder: Craigzooka is available to chat with Members regarding his virtual portfolio performance, comments are found below each post.

By Craigzooka

I am going to share with you how I manage my IRA and the power of reducing your cost basis.  My goal each year is a 20% return in my IRA.  Sometimes I make it and sometimes I don't, but I believe that all of my success is due to reducing my cost basis.  To illustrate the power of reducing your cost basis here are some trades we did last year.  These trades are taken from an educational portfolio we ran in a paper-trading account for a little more than a year.

  • We bought RIG on 5/15/2012 for $44.13, sold it on 1/18/2013 for $46 but booked a profit of $1,154.
  • We bought MT on 1/4/2012 for $19.24, sold it on 12/21/2012 for $15 but booked a profit of $454.
  • We bought CHK on 1/27/2012 for $21.93, sold it on 10/19/2012 for $18 b...


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ETF Selector

Stock Market Gets Big News After Friday’s Close

Courtesy of John Nyaradi.

Stock market posts another record setting week, but the big news came after Friday’s close.

Courtesy of NASA

The stock market put on another record setting show with the Dow Jones Industrial Average (NYSEARCA:DIA) closing at a record high 15,118 and the S&P 500 (NYSEARCA:SPY) closing at 1633.70, another all time closing high.

For the week, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 1%, the S&P 500 (NYSEARCA:SPY) climbed 1.2%, the Nasdaq Composite (NYSEARCA:...



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Pharmboy

Give Them an Inch, They Will Take a Mile

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

Well, well, well....it is good to know that there are others in the scientific arena who believed that YMI Bioscience's data (cough - Gilead) is a better drug than Incyte's Jakafi.  Now, the definitive data are still unknown, but there was enough evidence from a Phase 2 trial to take a small risk for a huge reward.  So, let's forget about Apple (AAPL), and do nothing but biotechs from now until Congress passes universal health care coverage for prescriptions....and drive the prices down so that research and development is no longer feasible to conduct in the US. Even Seattle Genetics (SGEN) has been on a tear as of late...



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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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