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What Will December 31, 2014 Financial Headlines Look Like?

What Will December 31, 2014 Financial Headlines Look Like?

By Elliott Wave International

The financial forecasts around the end of 2013 brimmed with optimism. Here are just a few examples:

  1. Many scoff at notion stock bubble exists — Associated Press, Nov. 19, 2013
  2. Economy Entering New Year on a Roll — Bloomberg, Dec. 25, 2013
  3. 'We have entered a 15- to 20-year bull market' — CNBC, Dec. 30, 2013
  4. Economy poised for strong 2014 — Atlanta Journal-Constitution, Jan. 1, 2014
  5. Market Prediction: Bull will keep charging in 2014 — USA Today, Jan. 2, 2014
  6. Bull Market has Years Left Based on S&P 500 Valuations — Bloomberg, Jan. 6, 2014
  7. Economist tells Denver audience to be aggressive over next four years — Denver Post, Jan. 9, 2014

This super bullish outlook was also expressed just before the 2000 and 2007 market tops. Indeed, a chart from the April 2014 Elliott Wave Financial Forecast shows that investment pros are more bullish now than before the two prior major market peaks.

EWI's special report, The State of the U.S. Markets — 2014 Edition notes:

Investors are even more optimistic than economists. While the overall economy barely grinds ahead in first gear, indicators of Wall Street psychology stand at historic extremes of optimism. This optimism is the only thing holding up nominal stock prices.

Market history shows that extremes in psychology always reach a turning point. The Wave Principle can help you identify when the market's trend is about to change.

It is a thrilling experience to pinpoint a turn, and the Wave Principle is the only approach that can occasionally provide the opportunity to do so.

The ability to identify such junctures is remarkable enough, but the Wave Principle is the only method of analysis that also provides guidelines for forecasting

It is our practice to try to determine in advance where the next move will likely take the market.

Elliott Wave Principle: Key to Market Behavior, tenth edition, p. 96

Be aware that the Wave Principle has now identified what appears to be a history making…
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STTG Market Recap April 22, 2014

Courtesy of Blain.

We continue in this “V shaped” move off last week’s touch of the 200 day moving average on the NASDAQ.  The S&P 500 gained 0.41% and the NASDAQ 0.97%.  The indexes are nearing overbought near term so a day or two of rest would serve the bulls well to try to attempt a new leg higher.  In economic news existing home sales hit 4.59 million in March, versus a 4.55 million estimate.

In terms of the indexes the S&P 500 stalled at the trend line that connected the lows of summer 2013; some congestion lies ahead at year highs.

spx

The NASDAQ has come back from deeply oversold conditions as this index is heavy with biotech and momentum stocks.  The dotted blue line is the previous high; since early March we have not seen the NASDAQ make a new “higher high” which would be step one to a true reversal.  So watch that level closely.

nasdaq

In the healthcare space Allergan (AGN) – the maker of Botox and breast implants – jumped after Valeant Pharmaceuticals International proposed a merger.

agn

Gilead Sciences Inc (GILD) advanced 2.% in after hours after the drugmaker said its new $1,000 hepatitis C pill generated quarterly sales of $2.27 billion, helping the company’s quarterly net profit nearly triple.  This is one of the companies in the very hard hit biotech sector.

gild

The transportation sector hit a new high today which is a good sign….

tran

…stocks like United Airlines (UAL) led the charge.

ual

And we are seeing a return to momentum stocks such as Tesla Motors (TSLA).  If both momentum stocks and biotech stocks regain their mojo it would be bullish.

tsla





S&P 500 Snapshot: Rally Now at Day Six

Courtesy of Doug Short.

Asia-Pacific indexes had a mixed day with the Shanghai Composite up 0.44% Nikkei down 0.85%. European indexes fared better — the EURO STOXX 50 rising 1.39%. The S&P 500′s 0.41% gain didn’t match the European enthusiasm, but it extended its rally to six days, the longest since its 7-day advance in early September of last year. Year-to-date the index is up 1.69% and only 0.60% below its record close on April 2nd.

The yield on the 10-year note finished at 2.73%, unchanged for the three sessions and 13 bps off the 2014 low of 2.60%.

Here is a snapshot of the past five sessions.

Here is a daily chart of the SPY ETF with today’s volume highlighted. It remains quite light although a bit above yesterday’s thin participation.

Here is a longer perspective, starting with the all-time high prior to the Great Recession.

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.





Weekly Gasoline Update: Premium Above $4.00

Courtesy of Doug Short.

It’s time again for my weekly gasoline update based on data from the Energy Information Administration (EIA). Rounded to the penny, Regular is up 3 cents and Premium four, the eleventh week of increases. Regular is up 49 cents and Premium 46 cents from their interim lows during the second week of November. The average for Premium at 4.01 has breached the four dollar benchmark for the first time since March of last year.

According to GasBuddy.com, California and Hawaii remain the only states with regular above $4.00 per gallon, with Hawaii now at $4.30 and California at 4.21. Montana has the cheapest regular at $3.33, up five cents from last week.

How far are we from the interim high prices of 2011 and the all-time highs of 2008? Here’s a visual answer.

The next chart is a weekly chart overlay of West Texas Intermediate Crude, Brent Crude and unleaded gasoline end-of-day spot prices (GASO). WTIC closed today at 104.35, up from 103.58 this time last week.

The volatility in crude oil and gasoline prices has been clearly reflected in recent years in both the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE). For additional perspective on how energy prices are factored into the CPI, see What Inflation Means to You: Inside the Consumer Price Index.

The chart below offers a comparison of the broader aggregate category of energy inflation since 2000, based on categories within Consumer Price Index (commentary here).

Here are some additional commentaries related to gasoline prices:





The End of the Gold Standard

Courtesy of Doug Short.

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


It was 100 years ago, in 1914, that the Gold Standard died. When World War I began, most countries went off the Gold Standard and attempts to return to a Gold Standard since have all failed. Some people have called for a return to the Gold Standard as a way of disciplining governments and ensuring that they do not inflate their way out of their current fiscal problems. If it were only that easy.

What many people don’t understand is that in the long run, the International Gold Standard was a very brief phenomenon, and the fact that the world moved to a Gold Standard in the late 1800s was a sign of weakness in the role of gold and silver in the economy, not of strength. The reality was that Europe was on a bimetallic standard, not a Gold Standard, from the Middle Ages until World War I, and gold triumphed in the nineteenth century because bimetallism had failed. This should have been taken as a sign that the gold standard too would inevitably fail, not that it was the result of teleological inevitability.

The first gold and silver coins were issued by Croesus in Lydia around 600 BC. Before that, both gold and silver were used as a store of for wealth, for conspicuous consumption, or to value other goods, but no coins existed. The value of gold relative to silver, the gold/silver ratio, changed over time. In 2700 BC it was around 9 to 1; under Hammurabi in 1800 BC it was 6 to 1; and by the time Croesus issued the first gold and silver coins, rather than electrum coins, it was 12 to 1.

The gold/silver ratio remained around 12 to 1 for the next 2500 years, though it could range as low as 9 to 1 or as high as 16 to 1. Athens built its empire on the silver mines of Laurium; Alexander the Great plundered the treasuries of the Persians; and the Romans seized this stolen bullion when they conquered the Mediterranean. Constantine took the gold of the Pagan temples for his needs, and whoever controlled Egypt could rely upon the mines in Nubia as a source of gold. When the Arabs spread Islam through the world,…
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CFNAI: Q1 Weakness Not Just A "Weather Report"

Courtesy of Doug Short.

Note from dshort: The CFNAI is one of my favorite monthly economic snapshots, for which I provide an quick overview shortly after its released and a drill-down on the four major subcomponents a few hours later. Today Lance Roberts offers a deeper perspective on this indicator.


There has been much “hope” by mainstream economists that the slowdown in economic growth in the first quarter of this year was simply due to the blast of inclement weather that shuttered production in much of the North East. While the “weather story” most certainly had a negative impact on economic growth in the short term, there is not much evidence that an economic revival is in the offing.

I have written several times in the past about the most overlooked economic indicator – the Chicago Fed National Activity Index (CFNAI). This index is a broad composite of 85 subcomponents that provide a broad overview of activity in the domestic economy from consumption to production. The most recent release of the CFNAI for March showed a rather steep decline in national activity to .20 from .53 in February. That decline was driven by a steep fall in Sales, Orders and Inventories from .08 in February to a negative .02, and a decline in Production and Incomes from .54 to .21 in March. The drop in these two specific indices does not bode well for continued increases in areas such as employment, hours and personal consumption which are primarily lagging indicators relative to actual activity.

The “hope” of economic revival is not new. It has been the repeated mantra by mainstream economists and the Federal Reserve since the end of the financial crisis. However, as shown in the chart below, each economic bounce due to an inventory restocking cycle has been short lived with economic growth languishing at sub-par rates.

As I said above, the cold winter blasts of snow and ice that shuttered in much of the North East during the beginning of 2014 certainly had a short-term negative impact on economic growth. Therefore, it is not surprising that we have seen an uptick in activity in recent economic reports as companies once again restock inventories and some…
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The Four Totally Bad Bears: New Update

Courtesy of Doug Short.

Note from dshort: At the request of The Advisory Group in San Francisco, here’s updated comparison of four major cyclical bear markets. The numbers are through April 21st close.


This chart series features an overlay of the Four Bad Bears in U.S. history since the market peak in 1929. They are:

  1. The Crash of 1929, which eventually ushered in the Great Depression,
  2. The Oil Embargo of 1973, which was followed by a vicious bout of stagflation,
  3. The 2000 Tech Bubble bust and,
  4. The Financial Crisis following the nominal all-time high in 2007.

The series includes four versions of the overlay: nominal, real (inflation-adjusted), total-return with dividends reinvested, and real total-return.

The first chart shows the price, excluding dividends for these four historic declines and their aftermath. As of today’s close are now 1643 market days from the 2007 peak in the S&P 500.

Inflation-Adjusted Performance

Nominal Total Returns

Now let’s look at a total return comparison with dividends reinvested. Our current post-Financial Crisis market is the top performer, up 37.8% from the 2007 peak with the post-Oil Embargo rally in distant second place, but also in the green.

Real (Inflation-Adjusted) Total Returns

When we adjust total returns for inflation, the picture significantly changes. The spread between three of the four markets narrows, and the current real total return has pulled far ahead of the post-Oil Embargo rally.

Here is a table showing the relative performance of these four cycles at the equivalent point in time.

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

These charts are not intended as a forecast but rather as…
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Richmond Fed Manufacturing Composite: Major Bounce from Last Month

Courtesy of Doug Short.

As a resident of the Fifth District, this is a regional manufacturing index I pay close attention to. The Fifth District includes Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. The Federal Reserve Bank of Richmond is the region’s connection to the nation’s Central Bank.

The complete data series behind the latest Richmond Fed manufacturing report (available here) dates from November 1993. The chart below illustrates the 21st century behavior of the diffusion index that summarizes the individual components.

The April update shows the manufacturing composite at 7, a major bounce from last month’s -7. Today’s composite number was above the Investing.com forecast of 0.

Because of the highly volatile nature of this index, I like to include a 3-month moving average, now at -2.0, to facilitate the identification of trends.

Here is a snapshot of the complete Richmond Fed Manufacturing Composite series.

Here is the latest Richmond Fed manufacturing overview.

Fifth District manufacturing activity improved in April, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments and the volume of new orders increased. Employment rose, while wages advanced at a slower rate. The average workweek was unchanged from a month ago.

Manufacturers looked for stronger business conditions during the next six months, although expectations were below last month’s outlook. Compared to last month’s outlook, survey participants anticipated somewhat slower growth in shipments, new orders, and capacity utilization. Manufacturers also looked for slower growth in employment and wages. In addition, expectations were for little change in the average workweek. They predicted vendor lead times would edge up at about the same pace as March’s outlook.

Current prices of raw materials and finished goods rose at a slower pace in April compared to last month. Manufacturers expected faster growth in prices paid and prices received over the next six months, although their outlook was below last month’s predictions.

Here is a somewhat closer look at the index since the turn of the century.


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Conference Board Leading Economic Index Increased in March

Courtesy of Doug Short.

The Latest Conference Board Leading Economic Index (LEI) for March is now available. The index rose 0.8 percent to 100.9 percent and the five previous months were revised upward (2004 = 100). The latest number was above the 0.7 percent forecast by Investing.com.

Here is an overview from the LEI technical notes:

The Conference Board LEI for the U.S. increased for the third consecutive month in March. This month’s gain in the leading economic index was driven by positive contributions from all the financial and labor market indicators. In the six-month period ending March 2014, the LEI increased 2.7 percent (about a 5.6 percent annual rate), slower than the growth of 3.3 percent (about a 6.6 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators remain widespread. [Full notes in PDF

Here is a chart of the LEI series with documented recessions as identified by the NBER.

And here is a closer look at this indicator since 2000. We can more readily see that the recovery from the 2000 trough weakened in 2012 but began trending higher in the latter part of the year.

For a more details on the latest data, here is an excerpt from the press release:

“The LEI rose sharply again, the third consecutive monthly increase,” said Ataman Ozyildirim Economist at The Conference Board. “After a winter pause, the leading indicators are gaining momentum and economic growth is gaining traction. While the improvements were broad-based, labor market indicators and the interest rate spread largely drove the March increase, offsetting the negative contribution from building permits. And, for the first time in many months, the consumer outlook is much less negative.”

“The March increase in the LEI suggests accelerated growth for the remainder of the spring and the summer,” said Ken Goldstein, Economist at The Conference Board. “The economy is rebounding from widespread inclement weather and the strengthening in the labor market is beginning to have a positive impact on growth.…
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Are Stocks Still in the Sweet Spot?

Courtesy of Doug Short.

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


I would like to continue with my recent theme — that is, I believe stocks still have bullish underpinnings. I wrote an article on March 18, 2013, entitled Current Trends and the Influence of Central Banks. In it I suggested coordinated global central bank policies had provided for a stock friendly environment. Specifically, I wrote, “On the other hand, in spite of massive interventions which are still being tested, it appears global central banks have coordinated efforts in such a way that until now, commodity, currency, and Treasury price stability have been reasonable; and this perhaps has contributed to a stock friendly environment for some nations.” Back then the S&P 500 Index was at 1552, while just recently, a little over one year later, it moved as high as 1897.

If the underpinnings I suggested then are indeed the key ones still influencing investor sentiment, then perhaps the stock market is not headed for the bear market some predict. Why do I entertain this thought? The same price stabilities I presented in the previous article remain in place in regard to interest rates, commodities and currencies. Please allow me to present charts that confirm this.

The first chart is a weekly bar of the Goldman Sachs Commodity Index. After a wild ride up during the early 2000s, followed by a precipitous fall after the 2008 onset of global financial turmoil, the index has moved quietly sideways for an extended period, confirming the lack of inflationary pressure within the global economy. I believe the stock market relishes this chart.

The second chart is a weekly bar of the US Dollar Index. When you observe the Dollar’s recent benevolent nature it becomes rather obvious that at least until now any talk of currency wars are conjured up perceptions rather than reality. In my opinion, this chart instead confirms the efficacy of a coordinated global effort to reign in currency volatility during an obviously challenging time. Once again I think the market enjoys this chart.

The final chart that…
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Phil's Favorites

China Manufacturing Output and New Orders Contract Once Again

Courtesy of Mish.

Chinese manufacturing remains in contraction for 2014. Output and new orders were down for the 4th consecutive month, but at a slightly reduced pace according to the HSBC Flash China Manufacturing PMI.



Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co - Head of Asian Economic Research at HSBC said:

“The HSBC Flash China Manufacturing PMI stabilised at 48.3 in April, up from 48.0 in March. Domestic demand showed mild improvement and deflationary pressures eased, but downside risks to growth are still evident...



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Insider Scoop

Delhaize Group Announces Sale of Bosnian & Herzegovinian Stores

Courtesy of Benzinga.

Related DEG Why Companhia Brasileira de Distribuicao (CBD) Has A Bright Short-Term Future? - Tale of the Tape The Fresh Market (TFM) in Focus: Stock Moves 6.7% Higher - Tale of the Tape

Delhaize Group (Euronext Brussels: DELB, NYSE: DEG), the Belgian international food retailer, announces that it has signed an agreement with Tropic Group B.V. on the sale of its Bosnian & Herzegovinian stores.

Delhaize Group has signed an agreement with Tropic Group B.V., to divest all of its 39 Bo...



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Zero Hedge

Eyeing Pipeline, Russia Forgives North Korean Debt

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Zachary Zeck via The Diplomat,

On Friday Russia’s parliament voted to write off roughly 90 percent of North Korea’s debt as Moscow seeks to build a gas pipeline through the Hermit Kingdom.

This weekend Reuters reported that Russia’s Duma voted to write off roughly $10 billion worth of the debt that North Korea owes Moscow from the days of the Soviet Union. The vote ratified an agreement made in September 2012, after a meeting between th...



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Chart School

STTG Market Recap April 22, 2014

Courtesy of Blain.

We continue in this "V shaped" move off last week's touch of the 200 day moving average on the NASDAQ.  The S&P 500 gained 0.41% and the NASDAQ 0.97%.  The indexes are nearing overbought near term so a day or two of rest would serve the bulls well to try to attempt a new leg higher.  In economic news existing home sales hit 4.59 million in March, versus a 4.55 million estimate.

In terms of the indexes the S&P 500 stalled at the trend line that connected the lows of summer 2013; some congestion lies ahead at year highs.

The NASDAQ has come back from deeply oversold conditions as this index is heavy with biotech and momentum stocks.  The dotted blue line is the previous high; since early March we have not seen the NASDAQ make...



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Market Shadows

Soy Numero Uno

Soy Numero Uno

By Paul Price of Market Shadows

Bunge Limited (BG) is the world’s largest processor of soybeans. It is also a major producer of vegetable oils, fertilizer, sugar and bioenergy.

When commodities got hot in 2007-08, Bunge’s EPS shot up and the stock followed, rising 185% in 19 months.

The Great Recession took its toll on operations, dropping EPS to a low of $2.22 in 2009.  Since then profits have recovered.  They ranged from $4.62 - $5.90 in the latest three years. 2014 appears poised for a large increase. Consensus views from multiple sources see BG earning $7.04 - $7.10 this year and then $7.83 - $7.94 in 2015.

...



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Option Review

Casino Stocks LVS, WYNN On The Run Ahead of Earnings

Shares in Las Vegas Sands Corp. (Ticker: LVS) are up sharply today, gaining as much as 5.7% to touch $80.12 and the highest level since April 4th, mirroring gains in shares of resort casino operator Wynn Resorts Ltd. (Ticker: WYNN). The move in Wynn shares appears, at least in part, to follow a big increase in target price from analysts at CLSA who upped their target on the ‘buy’ rated stock to $350 from $250 a share. CLSA also has a ‘buy’ rating on Las Vegas Sands with a $100 price target according to a note from reporter, Janet Freund, on Bloomberg. Both companies are scheduled to report first-quarter earnings after the closing bell on Thursday.

...

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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

What the Market Wants: Market Poised to Head Higher: 3 Stocks to Consider

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

Courtesy of David Brown, Sabrient Systems and Gradient Analytics

Yesterday, the market continued its winning ways for the fifth consecutive day.  The S&P 500 closed within 1% of its all-time high, and the DJI was even closer to its all-time high.  Healthcare, Energy and Technology led the sectors while Financials, Telecom, and Utilities finished slightly in the red.  All three sectors in the red are typically flight-to-safety stocks, so despite lower than average volume, the market appears poised to make new highs.

Mid-cap Growth led the style/caps last week, up 2.87%, and Small-cap Growth trailed, up 2.22%. This week will bring well over 100 S&P 500 stocks reporting their March quarter earn...



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OpTrader

Swing trading portfolio - Week of April 21st, 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 this week's Stock World Weekly. Click here and sign in with your PSW user name and password, or sign up for a free trial.

...

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Digital Currencies

Facebook Takes Life Seriously and Moves To Create Its Own Virtual Currency, Increases UltraCoin Valuation Significantly

Courtesy of ZeroHedge. View original post here.

Submitted by Reggie Middleton.

The Financial Times reports:

[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process. 

The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...



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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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Pharmboy

Here We Go Again - Pharma & Biotechs 2014

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

Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.

And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference.  Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014?  The Biotech ETF beat the S&P by better than 3 points.

As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...



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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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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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