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Archive for the ‘Chart School’ Category

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

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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Equity Markets: Rooster Today, Feather Duster Tomorrow

Courtesy of Doug Short.

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

The narrative for positive equity returns remains intact. The U.S. economy continues to strengthen and should expand for at least a couple more years. We wrote last August,

…factors are in place that have positive impacts on equities, including an accommodating Fed, low interest rates, rising profits, a growing economy, recovering housing prices and construction, increasing auto sales…

That is still largely the case.

This environment of mild inflation, low interest rates, loose monetary policy, improving economic prospects, and record corporate profits (due largely to low tax rates and low interest costs as discussed in our October 2013 Letter) has done wonders for risk assets.

Interest rates of the bottom rung of investment grade debt haven’t been this low since the 1960s. The high yield (junk) corporate bond market, the riskiest sort of business debt, is yielding just 5.50%, a rate you could earn with negligible risk on AAA-rated money markets prior to the last recession. Risk aversion is mostly absent and we suspect it will become more so.

The Standard and Poor’s 500 Index is now trading for 1.67 times sales, a level higher than any other period in history except for the peak years of the technology bubble. From this data point alone, one can expect low-single-digit average annual future returns:

The mathematics of the above table is straightforward. S&P 500 revenues have historically grown 4% per year. Dividends have grown by 6% per year. Since 1992, the price-to-sales ratio has averaged 1.38 times. If valuations normalize over the next seven years (even while sales and dividends continue to grow), broad equity market returns will barely cover the historical rate of inflation. Index investors should take note.

The benefit of utilizing price-to-sales to review potential future returns is the fact that it isn’t influenced by prevailing profit margins. This benefit is also its main fault, at least in the short-term. If margins are abnormally high, as they are today, price-to-sales would logically be higher than normal (as it is). But over longer periods, margins do mean-revert and thus using price-to-sales to estimate future returns makes economic sense. While broad markets will likely generate poor average returns over the next seven years due to elevated valuations,…
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Understanding the CFNAI Components

Courtesy of Doug Short.

The Chicago Fed’s National Activity Index, which I reported on earlier today, is based on 85 economic indicators drawn from four broad categories of data:

  • Production and Income
  • Employment, Unemployment, and Hours
  • Personal Consumption and Housing
  • Sales, Orders, and Inventories

The complete list is available here in PDF format.

In today’s Chicago Fed update, we learned that three of the four broad categories of indicators that make up the index increased from January, and two of the four categories made positive contributions to the index in February. Personal Consumption and Housing continues to be the significantly underperforming category. Let’s now take a look at the historical context, focusing on the less volatile 3-month moving average of the components.

A chart overlay of the complete multi-decade span of all four categories, even if we use the three-month moving averages, is quite challenging for visual clarity:

So here is a close-up view since 2000:

But a snapshot of the 21st century contains only two recessions, so it’s unclear how the individual components have behaved in during the seven recessions since the 1967 starting point for this data series.

Here is a set of charts showing each of the four components since 1967. Because of the highly volatile nature of the data, the charts are based on three-month moving averages, a smoothing strategy favored by the Chicago Fed economists. I’ve also highlighted the values for the months that the NBER subsequently identified as recession starts.

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Chicago Fed: Economic Growth Moderated in March

Courtesy of Doug Short.

“Index shows economic growth moderated in March”: This is the headline for today’s release of the Chicago Fed’s National Activity Index, and here are the opening paragraphs from the report:

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to +0.20 in March from +0.53 in February. Two of the four broad categories of indicators that make up the index made positive contributions to the index in March, and two of the four categories decreased from February.

The index’s three-month moving average, CFNAI-MA3, increased to a neutral reading in March from -0.14 in February, marking its third consecutive nonpositive value. March’s CFNAI-MA3 suggests that growth in national economic activity was at its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests limited inflationary pressure from economic activity over the coming year.

The CFNAI Diffusion Index increased to +0.04 in March from -0.14 in February. Fifty-one of the 85 individual indicators made positive contributions to the CFNAI in March, while 34 made negative contributions. Thirty-three indicators improved from February to March, while 51 indicators deteriorated and one was unchanged. Of the indicators that improved, nine made negative contributions. [Download PDF News Release]

The latest headline index at 0.20 matched the forecast of 0.20.

The Chicago Fed’s National Activity Index (CFNAI) is a monthly indicator designed to gauge overall economic activity and related inflationary pressure. It is a composite of 85 monthly indicators as explained in this background PDF file on the Chicago Fed’s website. The index is constructed so a zero value for the index indicates that the national economy is expanding at its historical trend rate of growth. Negative values indicate below-average growth, and positive values indicate above-average growth.

The first chart below shows the recent behavior of the index since 2007. The red dots show the indicator itself, which is quite noisy, together with the 3-month moving average (CFNAI-MA3), which is more useful as an indicator of the actual trend for coincident economic activity. I’ve added a high-low channel for the MA3 data since 2010. As we can see, the MA3 of the index hit the top of the channel in November of last year. It is now hovering near the mid-range of this channel.

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Watching the Shanghai Whale

Courtesy of Doug Short.

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

When it comes to population, China is huge — representing one sixth of the total world’s headcount. Does size matter? At this time it appears the Shanghai Composite is testing the underside of this flag/pennant pattern at (1) in the chart below.

The Emerging markets ETF (EEM) has lagged the U.S. over the past few years, yet has done really well of late, having rallied from the bottom of its flag/pennant pattern.

Even though the Shanghai & Emerging markets haven’t done nearly as well over the past few years as the United States and Europe, what direction the Shanghai takes from here could tell us a great deal about worldwide growth … or the lack thereof.

Keeping a close eye on this whale and Emerging markets right here!

For information about Kimble Charting Solutions, send an email to

Vehicle Miles Driven: Another Population-Adjusted Low

Courtesy of Doug Short.

The Department of Transportation’s Federal Highway Commission has released the latest report on Traffic Volume Trends, data through February.

Travel on all roads and streets changed by -0.8% (-1.7 billion vehicle miles) for February 2014 as compared with February 2013 (see report). However, if we factor in population growth, the civilian population-adjusted data (age 16-and-over) is at a another new post-Financial Crisis low and total population-adjusted variant is only fractionally above its low set in June of last year.

Here is a chart that illustrates this data series from its inception in 1970. I’m plotting the “Moving 12-Month Total on ALL Roads,” as the DOT terms it. See Figure 1 in the PDF report, which charts the data from 1989. My start date is 1971 because I’m incorporating all the available data from earlier DOT spreadsheets.

The rolling 12-month miles driven contracted from its all-time high for 39 months during the stagflation of the late 1970s to early 1980s, a double-dip recession era. The most recent decline has lasted for 70 months and counting — a new record, but the trough to date was in November 2011, 48 months from the all-time high.

The Population-Adjusted Reality

Total Miles Driven, however, is one of those metrics that should be adjusted for population growth to provide the most meaningful analysis, especially if we want to understand the historical context. We can do a quick adjustment of the data using an appropriate population group as the deflator. I use the Bureau of Labor Statistics’ Civilian Noninstitutional Population Age 16 and Over (FRED series CNP16OV). The next chart incorporates that adjustment with the growth shown on the vertical axis as the percent change from 1971.

Clearly, when we adjust for population growth, the Miles-Driven metric takes on a much darker look. The nominal 39-month dip that began in May 1979 grows to 61 months, slightly more than five years. The trough was a 6% decline from the previous peak.

The population-adjusted all-time high dates from June 2005. That’s 104 months — over…
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Happy Birthday to Me!

Courtesy of Doug Short.

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

As you read this issue of Profit Confidential today, I will be in Rome, Italy celebrating my 50th birthday. Yes, I turn the ripe age of 50 today.

My father, who is getting close to twice my age, says life begins at 50. We’ll see. (He told me the same thing at 40!)

I have a lot to be thankful for in my 50 years. A great family; the best of the best when it comes to friends and to my extended family of hundreds of thousands of people who have taken it upon themselves to see what silly things I have to say each day.

I started this business 28 years ago with nothing more than a typewriter, raw ambition, and the idea I could study the markets well enough to help other people make more money from their investments.

What was once only one business has grown into many businesses today. We’ve grown from one employee (me) to many talented, hard-working people creating new things daily … people I truly enjoy working with and growing with every day.

Over the years, I have been lucky to have made a series of “calls” that hopefully made my readers some money. Looking back, my call to buy gold in 2002 at $300.00 an ounce, my call to get out of the U.S. housing market in 2005, my calls to get out of the stock market in 2007 and back into it in 2009 have garnered a following of hundreds of thousands of concerned investors daily.

My current “call” is for the stock market rally that started in 2009 to come to an end. This call, too, will come to fruition with a bang.

Looking back, the older I get, the more I realize how easy it is for an investor to make money. All you need to do is the opposite of what the herd is doing. Over the long-term, it always works.

If everyone is buying stocks (like they were in 2007 and again today), you want to sell stocks. When nobody wants stocks (1974, 1987, 2009), you want to buy stocks.

When nobody wants gold, you want it. When people are loading up on houses, you don’t want them. Opportunities to truly buy…
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Gauging Investor Sentiment with Twitter: Weekly Update

Courtesy of Doug Short.

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

The Downside Hedge Twitter sentiment indicator for the S&P 500 Index (SPX) is showing a lot of indecision by market participants. Both the daily and smoothed indicator are being dragged around by price. The consolidation warning issued the previous week came as the market was making a bottom and is another indication of chasing by traders on Twitter. They aren’t committing themselves to positions or more likely are getting stopped out by the volatile intra-day swings.

Smoothed sentiment is still below its confirming down trend line after signaling a warning so the consolidation warning is still in effect. This indicator has been bouncing back and forth above the zero line for over a month and adds to the argument of uncertainty.

Price targets gleaned from the Twitter stream continue to paint a disconcerting pattern with very few tweets calling for prices above current market levels. This has been a theme since late December which illustrates the reluctance of market participants to deploy new money expecting higher prices. The result has been a very choppy market since the first of the year. Over the past few weeks this condition has been exacerbated by a rising number of tweets for prices well below current levels. This sets up a situation where traders believe there is large downside risk, but very little upside reward. This alone urges caution and suggests that the market will need a reason to move substantially higher. Currently, major support is at 1840 and 1800 on SPX. Below that 1770 and 1740 garner the most tweets. Resistance is at 1875 with nothing significant above that level since the first of the month when there were a few calls for 1900.

Sector sentiment continues to show some defensiveness with Consumer Staples and Utilities highly positive. Basic Materials, Energy, and Technology are the leading sectors with the highest sentiment.

Overall sentiment is showing uncertainty by market participants. The indicators are moved more by price than expectations and hard observations, traders aren’t calling for higher prices, and sector sentiment is positive for both leading and defensive stocks.

Blair Jensen at Downside Hedge tracks Twitter sentiment and provides hedging strategies for individual investors.

Dow Jones Industrial Average Rallies Again

Courtesy of Doug Short.

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

The Dow Jones Industrial Average and other major U.S. stock indexes stage another rally.

The Dow Jones Industrial Average (NYSEARCA:DIA) dipped slightly going into the Easter Holiday weekend but gained 2.4% for the week as the sideways trading range continues.

The S&P 500 (NYSEARCA:SPY) added 2.7% for the week while the Nasdaq Composite (NYSEARCA:QQQ) climbed 2.4% on the week.

The Russell 2000 (NYSEARCA:IWM) also gained, adding more than 2% for the week.

Major U.S. stock indexes have been rallying back from the previous weeks’ declines but remain in a trading range that began in mid-February.

Most of the recent damage was done in the Nasdaq (NYSEARCA:QQQ) and Russell 2000 (NYSEARCA:IWM) but these two have reclaimed their respective 200 day moving averages and the four major U.S. stock indexes have been in rally mode and apparently are ready to mount yet another challenge to breakout above their recent highs.

While all of the indexes remain on various technical “sell” signals, the tide is clearly changing and now we’ll have to wait and see whether or not this latest challenge will be successful.

A breakout higher would be positive for U.S. markets while another failure could open the door to lower prices. Trading ranges and false breakouts, both up and down, like we’ve seen in the last couple of months are frustrating. However, they always end in one direction or other, and the longer they go on, the more powerful the subsequent breakout usually is.

On My Stock Market Radar

The point and figure chart of the Dow Jones Industrial Average (NYSEARCA:DIA) paints a clear picture of the current situation.

The index has reversed course into a column of Xs which indicates that demand is now again in control of the markets, but the rally hasn’t been strong enough to generate a new “buy” signal and so the index remains with a bearish price objective of 15,600. A break above 16,450 would generate a new “buy” signal and open the door to a new challenge of the 16,600 level and new highs.

As usual, major factors are the Federal Reserve and the current earnings season that is now entering full swing.

So far earnings have…
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Phil's Favorites

Hoisington Investment Management Quarterly Review and Outlook

Outside the Box: Hoisington Investment Management Quarterly Review and Outlook, First Quarter 2014

By John Mauldin

In today’s Outside the Box, Lacy Hunt and Van Hoisington of Hoisington Investment have the temerity to point out that since the Great Recession officially ended in 2009, the Federal Open Market Committee (FOMC) has been consistently overoptimistic in its projections of US growth. They simply expected QE to be more stimulative than it has been, to the tune of about 6% over the past four years – a total of about $1 trillion that never materialized.

Given that dismal track record, our authors ask why we should believe the Fed’s prediction of 2.9% real GDP growth for 2014 and 3.4% for 2015 – particularly with QE being tapered into nonexistence. ...

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Zero Hedge

James Clapper Begins Propaganda Tour After Students Identify Edward Snowden As "Personal Hero"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

Kevin Gosztola over at Firedoglake does some excellent work, and his latest story about the recent activities of perjuring Director of National Intelligence for the U.S., James Clapper, is no exception. To provide a little context, the Washington Post ...

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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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Chart School

Dead-Cat Bounce Over for the Housing Market?

Courtesy of Doug Short.

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

I have been saying this for a while: You can't have a housing recovery unless actual home buyers are involved.

We are very far away from seeing the housing market reach its 2005 highs ... and as time passes, it becomes clearer that this generation may never see them again.

How can I say that?

What we have seen in the housing market since then, but mostly since 2012, in my opinion, is nothing more than a dead-cat bounce scenario -- an increase in prices after a massive decline. The chart below shows how far off we are from the housing prices of 2005.

Chart courtesy of

One of the key indicators I follow in ...

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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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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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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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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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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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FeedTheBull - Top Stock market and Finance Sites

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.

Market Shadows >>