Archive for 2011

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The EEM/EFA Indicator and the S&P 500

Courtesy of Doug Short

Last week I shared an indicator from Chris Kimble — a chart that divides the iShares Emerging Markets Index (EEM) by the iShares MSCI EAFE Index (EFA), which is a surrogate for developed markets excluding the U.S. and Canada. The indicator, Chris suggested, is flashing a warning signal.

I’ve received a number of emails asking more specifically about the relevance of this indicator for the U.S. markets. Below is my EEM/EFA chart with the S&P 500 in the background. The timeframe is from the inception of the EEM/EFA data in 2003. I’ve included the 200- and 50-day moving averages to help clarify the indicator trends.

What conclusions can we draw? Chris’s original post was essentially a “heads up” warning that global trends could be on the threshold of change. The data series doesn’t extend back very far, but the S&P 500 overlay suggests that the caution alert also applies to the U.S. market.

Another Immune Company Play – Immunomedics

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

Cancer is a class of diseases in which a group of cells display uncontrolled growth.  Some cancers invade or intrude upon adjacent tissues, then destroy that tissue/organ, and then spread (metastasize) to other locations in the body via lymph or blood.  These three malignant properties of cancers differentiate them from benign tumors, which do not invade or metastasize.  All of these diseases suggest that there will be a need for personalized therapy, as even within a specific type of cancer, there is wide heterogeneity in clinicopathological features.  For instance, leukemia, lymphoma, myeloma, etc are all lymphoproliferative disorders (where lymphocytes are produced in excess) affect one or more different biological pathways that play a role in lymphomagenesis (the development of B cells and T cells).  Over the past year, on focal point of our  investment virtual portfolio has been smaller companies researching and developing treatments for cancer (CRIS, ARIA, ARRY, SPPI, IMGN).  The next small company with some very interesting prospects in the pipeline is Immunomedics.

Figure 1.  Cancer Prevalence.

In our recent past, monoclonal antibodies (mAbs) were discussed in the context of a mid-tiered pharma, BIIB and smaller biotech, Immunogen (IMGN).  These companies will not be rehashed, but to re-emphasize that mAb and biologics are one of the hottest areas in in biotech.  Small molecules have are not the favorites for now (especially in cancer), and that is most likely due to early stage trials, lack of efficacy, or more likely – patent protection, as biologics/mAbs are harder to show equivolance….and thus have the potential to generate cash for years to come. 

(IMMU) based in New Jersey, is primarily focused on the development of mAb-based products for the targeted treatment of cancer, autoimmune and other diseases.  The company has a number of advanced mAbs that can be used either alone in unlabeled or “naked” form, or conjugated with radioactive isotopes, chemotherapeutics or toxins, in each case to create highly targeted agents (think Inmunogen, but different 'targets').  The company has built a pipeline of therapeutic product candidates that utilize several different mechanisms of action discussed below.  The company also owns a stake in IBC Pharmaceuticals, Inc., which is developing a novel Dock-and-Lock (DNL) methodology. …
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Rubber Hits An All Time High As Last R-Bubble Approaches Escape Velocity; Rubber Curve In Backwardation

Courtesy of Tyler Durden

Now that the Rare Earth bubble has come and gone (and may well come back again depending on how much China wants to stretch its political muscle), the Rice bubble is in progress, and may see prices going back to the $24 range we saw last in 2008 when net CBOT non-commercial spec contracts were approaching the 8k levels, the last R-bubble prediction is coming true. Back in October, Zero Hedge said the next bubble are the 3Rs -Rare earths, Rice and Rubber. Lo and behold, rubber just hit an all time high on the Tocom, after returning 30% YTD. And far more importantly to those who care about such things, the rubber forward curve is in backwardation. No need to explain what that means.

Below is the 63% return since we predicted Rubber’s imminent entry into bubble territory, in all its glory:

And the forward curve: the JRUN11 (July) is at ¥511, while the ^JRU is at ¥523.

“Get Ready For Margin Collapse” Goes Mainstream

Courtesy of Tyler Durden

First it was “Get Ready For Higher Food Prices” going mainstream… Now, logically following, it is “Get Ready For Margin Collapse.” As Zero Hedge has long been warning, the one immediate consequence of surging commodity prices as a result of endless liquidity, is a collapse in corporate margins. Now, about 6 months after we first broached the topic, it has finally hit the mainstream media. The WSJ highlights what is so obvious, it is no wonder no sellside “strategist” is willing to touch the topic with a ten foot pole: “This earnings season has seen a much-welcomed return to revenue growth, giving investors another reason to push stocks to two-year highs. But beneath the surface lurks a fresh worry: For many companies, the cost of raw materials is rising at a faster pace than revenue. Blame it on soaring prices of everything from cotton to copper and corn. That has squeezed profit margins more markedly than many analysts anticipated—and is serving as a worrying sign for future earnings.” But yes, aside from the painfully obvious collapse in margins, and thus plunge in net income (sorry, companies can’t fire their skeleton crew workers any further) which will mean 2011 S&P 500 EPS will come far, far lower than prevailing consensus, everything is fine.. and don’t forget to BTFD.

The WSJ - about half a year behind the curve:

rocter & Gamble, Ford Motor  and Kraft Foods are among dozens of companies that reported lower profit margins for the fourth quarter of 2010 compared with the third quarter. Their stocks were punished by investors, even as the companies’ profit and revenue exceeded analyst forecasts. The cool reception stood in contrast to the general optimism among investors that has helped the Dow Jones Industrial Average to gain about 6% this year.

About three-quarters of the companies in the Standard & Poor’s 500-stock index have reported their earnings so far. Some 25% of those companies have posted lower margins in the latest quarter, according to Morgan Stanley. S&P says operating margins for S&P 500 companies in the latest quarter have come in at 8.69%, down from margins of 8.95% for the S&P 500 in the third quarter.

Stunningly, the computers doing all the trading are shocked, shocked, to find out there have been…
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I Smell a VAT & (tax) Holiday Fun

Courtesy of Bruce Krasting

I Smell a VAT!

On 2/2 I wrote about a bill proposed by Congressman Kevin Brady (R,Tx). The bill would make the deduction of state sales taxes a permanent part of the tax code. As of today one can deduct sales taxes but the law allowing this expires in two years.

What I found interesting was that the (current) deductibility of local property and state income taxes (“PI”) was not included in Brady’s’s bill. The suggestion to me was that as soon as the sales tax issue had been made permanent, deductions for the other SALT taxes would be eliminated. I didn’t think that the bill had a snowballs chance in hell given that it would have opened the door to higher net taxes via lower deductions. (stealth) This bill would have been very damaging to the big Blue states of CA, Il and NY.

Well, I’m wrong again. Senator Maria Cantwell (D. Wa) has introduced S.24:

To amend the Internal Revenue Code of 1986 to permanently extend the election to deduct State and local sales taxes. Be it enacted by the Senate and House of Representatives of the  United States of America in Congress assembled,

Cantwell’s Bill has the support of other big Democrats including, Reid, Nelson, plus some senate republicans; Ensign and Alexander.

With that cast of characters this bill is going to pass. Deductibility of state sales taxes is going to be made permanent. What might this mean?

I think this is the first step towards eliminating the other critical deductions of income and property tax. That would be an absolute disaster for the big Blues. They all have high property taxes as well as big income taxes. States like Texas with no income tax but big sales taxes would win big. (What is Harry Reid thinking of??)

Should this happen it will change the way states generate income. Sales taxes will rise in every state to take advantage of the permanent deduction and the loss of deductibility of other SALT taxes. I doubt that this will be offset by any reductions in PI. Net-net the blues lose, which is the point of this.

I think this legislative maneuvering is leading

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Guest Post: Democracy And Its Contradictions

Courtesy of Tyler Durden

The next in a continuing series (most recently: Evil and the State).

Submitted by Free Radical

Democracy and Its Contradictions

Democracy, as Churchill said, “is the worst form of government except for all those other forms that have been tried from time to time,” the assumption being that because the state is the only conceivable form of government (and therefore necessary for civil society to exist), the democratic state is the best state, even if it is merely the best among bad ones. This flies in the face, of course, of the godlike esteem in which democracy is held around the world, both by those who are ruled by such states and by those who yearn to be. Democracy, after all, is based on “the proposition that the legitimacy of all political power arises from, and only from, the consent of the governed, the peoplei  – the assumption being that the democratic state embodies this noble proposition. 

The problem, however, is that while the people’s consent in a democratic state is supposedly expressed through the right to vote – through the so-called “ballot” – consent has little if anything to do with the process:

Doubtless the most miserable of men, under the most oppressive government in the world, if allowed the ballot, would use it, if they could see any chance of thereby meliorating their condition.  But it would not, therefore, be a legitimate inference that the government itself, that crushes them, was one which they had voluntarily set up, or even consented to.

What does it mean, in other words, to vote within the confines of that which one had no vote in creating and when those confines, therefore, cannot legitimately – i.e., in a morally justifiable manner – rule over one? Even assuming that those confines are minimal (though none are, of course, even if they were so conceivedii), what moral authority or obligation can such confines have?  What authority or obligation, that is, can political constitutions have?

The answer, simply put, is none.  The United States Constitution, for example,

… has no authority or obligation at all, unless as a contract between man and man. And it does not so much as even purport to be a contract between persons now existing. It purports,

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The S&P 500 and DAX Are Way Outperforming the Plummeting Hang Seng and Bombay

Courtesy of Doug Short

How much longer will this last?

Here is the latest weekend snapshot of seven major world indexes. For the second consecutive week, the S&P 500 and DAX ended at new interim highs. In fact all the markets saw gains except the Bombay SENSEX, which is now 15.6% off its all-time high set last November, and the Hang Seng Index, which lost 5.42% from its previous weekly close on Wednesday, February 2 (the HSI was closed for Lunar New Year on the 3rd and 4th). The Shanghai Composite remains in the cellar, 18.55% off its interim high, even though it has gained 5.6% since its interim low on January 25.

The chart below illustrates the comparative performance of World Markets since March 9, 2009. The start date is arbitrary: The S&P 500 and Bombay SENSEX hit their lows on March 9th, the Nikkei 225 on March 10th, the DAX on March 6th, the FTSE on March 3rd, the Shanghai Composite on November 4, 2008, and the Hang Seng even earlier on October 27, 2008. However, by aligning on the same day and measuring the percent change, we get a better sense of the relative performance than if we align the lows.

A Longer Look Back

Here is the same chart starting from the turn of 21st century. The relative over-performance of the emerging markets (Shanghai, Bombay, Hang Seng) is readily apparent. However the pattern has been in reversal over the past few months.

Who the REAL Taxpayers Are & Why Income Inequality Isn’t Nearly As Much of a Problem As Critics Claim

Courtesy of Stone Street Advisors

(Originally published at Stone Street Advisors)

I’m sick & tired of politicians, pundits, and "average joe’s" invoking the term "Taxpayer" in their mostly uninformed rhetoric.  You know what I’m talking about: "The Taxpayers are angry about bank bailouts," or better, things like "The Banksters are getting rich at the expense of The Taxpayers."  First of all, 40% of Americans pay ZERO Federal Income Tax (some even get net subsidies!), so right off the bat, almost half of Americans need to seriously shut their traps & do a little research before whining about fairness of U.S. Tax (etc) policy.  The half and mis-truths propagated by The Ignorati don’t stop there, though.  Not even close…

The top 25% of earners pay almost 87% of Federal Income Tax!  And that was in 2007, I doubt that number has gotten any smaller in subsequent years.  Put this another way, the lower 75% of earners only pay less than 14% of Federal Income Taxes even though they account for ~31% of income.  Those in the top 1%, by comparison, earn ~23% of income but pay over 40% of Federal Income Taxes, an increase in the tax burden on the top 1% of 57% over the past 20 years.

The top 0.1% accounts for half of the money earned by the top 1%, i.e. the VERY rich are and have been getting richer faster than the merely wealthy, who themselves are getting more wealthy, faster, than those in the top 10 and 25%’s.  Income’s at the top are increasing faster than those on lower income rungs of the income ladder(and this is just looking at the top 25%!)  This is not necessarily a surprise, though, considering the shifts in the U.S. Economy and labor force adjustments (or lack thereof).

Is it "fair" that the top 0.1% of earners pay over 20% of the taxes?  Is it fair that the 75% of filers making less than $32,095 (the lowest income in the top 25% in 2007) a year only pay 14% of taxes, yet are disproportionally the recipients of Government aid programs?  I think the answer to both is probably far closer to "no" rather than "yes."

For example, wouldn’t it make more sense to decreases taxes on "the poor" so they would be able to keep more of their $ rather than giving it to…
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Zero Hedge

Auto Shares Surge As Fiat, Renault Confirm Merger Talks

Courtesy of ZeroHedge. View original post here.

With President Trump in Japan for a state visit and most of Europe headed to the polls to vote in the quinquennial EU Parliamentary elections, there was enough news to keep market watchers occupied during what was supposed to be a quiet holiday weekend in the US. 

But on top of these political headlines, on Saturday afternoon, the news broke that Italian-American carmaker Fiat Chrysler had approached France's Renault with a merger proposal that would leave the shareholders of each carmaker with half of the combined company, in a tie-up that would create the world's third-largest au...

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Phil's Favorites

Trump and the problem with pardons


Trump and the problem with pardons

Courtesy of Andrew Bell, Indiana University

As a veteran, I was astonished by the recent news that President Trump may be considering pardons for U.S. military members accused or convicted of war crimes. But as a scholar who studies the U.S. military and combat ethics, I understand even more clearly the harmful long-term impact such pardons can have on the military.

My researc...

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Insider Scoop

Jefferies Sees 60-Percent Upside In Aphria Shares, Says Buy The Dip

Courtesy of Benzinga.

After a red-hot start to 2019, Canadian cannabis producer Aphria Inc (NYSE: APHA) has run out of steam, tumbling more than 31 percent in the past three months.

Despite the recent weakness, one Wall Street analyst said Friday that the stock has 30-percent upside potential. 

The Analyst

Jefferies analyst ... more from Insider

Kimble Charting Solutions

DAX (Germany) About To Send A Bearish Message To The S&P 500?

Courtesy of Chris Kimble.

Is the DAX index from Germany about to send a bearish message to stocks in Europe and the States? Sure could!

This chart looks at the DAX over the past 9-years. It’s spent the majority of the past 8-years inside of rising channel (1), creating a series of higher lows and higher highs.

It looks to have created a “Double Top” as it was kissing the underside of the rising channel last year at (2).

After creating the potential double top, the DAX index has continued to create a series of lower highs, while experiencing a bearish divergence with the S...

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Chart School

Brexit Joke - Cant be serious all the time

Courtesy of Read the Ticker.

Alistair Williams comedian nails it, thank god for good humour! Prime Minister May the negotiator. Not!

Alistair Williams Comedian youtube

This is a classic! ha!

Fundamentals are important, and so is market timing, here at we believe a combination of Gann Angles, ...

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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control


Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...

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DNA as you've never seen it before, thanks to a new nanotechnology imaging method

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


DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University


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More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...

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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism


The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...

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Swing trading portfolio - week of September 11th, 2017

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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Free eBook - "My Top Strategies for 2017"



Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:


·       How 2017 Will Affect Oil, the US Dollar and the European Union


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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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