Weekly Analytics

First up is the Market Club Trade Triangle chart for the S&P 500 for the past twelve months:

Weekly Trade Signals:

BUY 3/24/08.......1344........+39
SELL 5/23/08.......1383........+62
BUY 8/6/08.......1321...........-60
SELL 9/4/08 .......1261........+365
BUY 12/8/08.......896............-39
SELL 1/14/09.......857...........+77
BUY 3/18/09.......780..........+76

Cumulative gains = 520 pts. = $26,000 per single e-mini S&P contract = 520% per $5K margin.

This is a very basic, objective, inexpensive (Market Club is a bargain for what you get) way to follow trends across a wide array of tradables. If you have been with me for awhile, you know that I use Market Club along with other more sophisticated (read: expensive, i.e. Advanced GET and Blue Wave) analytic tools, as well as subscriptions to Glenn Neely and Robert Prechter, the two preeminent pattern recognition analysts of our time.

Rather then go into a litany of why all of the above works for me, the trades posted above are derived from a simple weekly breakout pattern embedded in Market Club's chart trading package. My point is you don't need rocket science to compete in the markets. So let's distinguish from the outset that winning trades and profitability are distinct from intellectual and more subjective forecasts based on theory and crowd psychology. The former is a necessity, you must make money to remain in this arena. The latter is a luxury, we want to understand why the markets are making directional moves, but understanding the why is not essential in order to profit from those directional moves.

Below is a 30-year chart of the S&P 500:


The only indicator appearing on this Monthly chart is a 30-year False Bar Stochastic. The this entire period the FBS has been on the correct directional side of the market. The black horizontal lines indicate that a trend is in place. After being correctly long from 1981 through 2000, the FBS is currently only in it's second Sell trend of the entire period. This is a partial explanation as to why my bias has been to the short side. But it doesn't tell all.

Below is a Weekly chart, again with only the FBS attached:


Where to from here? A close up of the right side of this chart:


There is only one conclusion: This pattern is only a few bars (weeks) away from a major Sell signal, as per the Sell generated in the 2nd quarter of 2008, resulting in a 35% decline in the index.

What sayeth Elliott Wave (as per Advanced GET, my EW software)?


The trend line coming down off of the Wave 2 top, about one year ago and signalled by the FBS, is at about 1000 for this coming week and dropping about 25 points per week. In a perfect world, these indicators a suggesting that in about one month and about 25-50 points higher in the S&P, this rally will end and dramatic market decline will begin.

Perfection aside, where does that leave trading direction for market open next Monday? Let's add Blue Wave's trend following indicator to the above chart:


Buy 3/31/08..............1370....... -24
Sell 6/16/08..............1346....... +428
Buy 12/29/08............918......... -108
Sell 2/16/09...............810........ +1
Buy 3/23/09..............809........ +47

Weekly trade signals for Blue Wave netted 344 points for the same market and same time period as Market Club's trade triangles above. Not as much, but still a very respectable return.
(Blue Wave works on all time frames, but my work uses it on intraday trading, unlike MC's Triangles which is a longer term trading tool.)

Finally, my most complicated chart of the day. It's a 60-minute EW chart with BW's trend along with a Advanced GET's "Make or Break" indicator. This is the blue horizontal lines that appear at what Advanced GET has computed to be Fiboancci-based resistance areas. The theory here is that these areas are natural resisitance areas where prices will either reverse or break through and accelerate.



The first MOB stopped the rally dead in its tracks during the first week in April. The second MOB is appearing now, at this time and at these levels. The stop-reverse Short level for BW as of the first hour of trading Monday is at 848.06. You can see it highlighted on the right side of the chart. That's the level where BW would flip Short, closing out it's Long position taken April 8th at 823.82. Even if that occurs, BW will have locked in a 25 point win on this trade.

That's about it for this Weekly Analytics post. Trading can be as easy or as complicated as you care to make it. Some tools and analysts are better then others and I hope to have highlighted my ideas and preferences for what works for me in the studies above. There is no perma-Bear or perma-Bull or perma-Anything about the way I look at the markets. Labelling me or anyone on the basis of any particular set of posts or blogs or charts is a shallow and deceptive practice. As I have tried to set out in this blog, there is an analytical reason and purpose behind all that I write and opine about.

The market is dynamic, as should be anyone who chooses to bet on it's path. There is no one right or wrong way to approach market timing and direction. But there is only one model that makes any sense:

Find something that works....................then use it.

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Two Biotech Triangles

CXM Trade Triangle Chart:

QLTI Trade Triangle Chart:

More information on Trade Triangles and how to trade them by clicking "Market Club" link on right side of blog, above Donate link.

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CXM - update

CXM printed $1.89 today, opening the door wide open for $3.50 later this year. I would like to see volume pick up to go into full confidence mode, but the chart below, which doesn't look at volume, is suggesting a 3rd wave UP in place:


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NEoWave

NEoWave is a proprietary market analysis technique developed by Glenn Neely. It is commonly compared to Elliott Wave analysis in its approach to pattern recognition of price behavior in individual markets. There are some significant differences though, not the least of which is described below in NEoWave's "Question of the Week."

Question Of The Week

	Question:
	In your NEoWave TRADING services, you have mentioned the concept of price behavior many times. What is price behavior?
	Answer: The concept of "price behavior" is covered indirectly throughout Mastering Elliott Wave, but is specifically addressed in the complex logic sections of Chapter 3 and in the "confirmation" sections of Chapter 6. The NEoWave concept of "price behavior" focuses on how a monowave (or group of monowaves) relates to surrounding waves (or wave groups) from a price, time and complexity perspective. In general, whichever direction a market moves the most (in price) in the least amount of time IS the direction of the trend of one larger degree. So, for example, if you see an advance in Gold of $10 in 1 day, followed by a reaction of $5 over 5 days, Gold's "price behavior" tells us the trend in Gold is UP. Any wave count that disagrees with that "fact" will probably be wrong. For example, let's assume that after the above $10 advance I place a wave count that implies Gold is topping. The slowness of the $5 decline that follows would quickly FORCE me to change my mind and alter wave structure. Why? Because my past assumption of a terminating advance would be in direct contradiction to current price behavior implications (i.e., the implication that the trend is still UP). It is because of the above concept, and many more NEoWave concepts (such as self-definition and self-confirmation), that I'm frequently able to talk about markets so objectively and matter-of-factly, as if I'm "reading tomorrow's paper," instead of merely expressing my own beliefs. I'm simply telling you (my subscribers) what the market is telling me to say in real-time based on its behavior, not just its wave structure. It all has to be in-sync to make sense, be logical and predictable.

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CXM

There are several technical and fundamental reasons to like CXM. I've been buying lightly recently based on the story and the chart.


The fundamental story is here, Cardium is a $77M company with three blockbuster avenues to profitability:



Technically, if $1.87 is taken out anytime soon, $3.50 is targeted by EW analysis.

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Deflation & Oil

The case for oil is a bearish one. The Daily chart of USO below reveals a long term downtrend that is unfinished to the downside. Notwithstanding day-to-day fluctuations, the pattern is not all that different from stocks:


A year ago transportation companies, airlines, truckers, buses, taxi's and shuttles were tacking on oil price fees to compensate for $140 oil. What will they do for us at $20 oil?

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Sisters of mercy

Oh the sisters of mercy, they are not departed or gone.
They were waiting for me when I thought that I just can't go on.
And they brought me their comfort and later they brought me this song.
Oh I hope you run into them, you who've been traveling so long.


Leonard Cohen


Just as there is a difference between dreaming and living, there is also a difference between forecasting and trading. Please keep this in mind as I post these pieces, obliquely ranging between two dimensions. Observations are nothing, without the patience and discipline to allow these patterns to mature. The casino is unforgiving, the payoffs elusive. Persistence collects an untimely reward.



Above the Daily VIX. Tracked with perfection by the False Bar Stochastic. BUY the tops, SELL the LOWS, ignore the drizzle that follows the storm.

Below the weekly forecast chart of market, still tracing out it's complex 4th Wave. Just bars away from an FBS Sell.


Follow the FBS beneath the previous Wave 2 rally. Look at it today. Bring out that patience, stowed away for a rainy day.

By special request, a look at Gold:

The forecast and trend say lower. Maybe a few days up to shake the weak hands first.

Well they lay down beside me, I made my confession to them
They touched both my eyes and I touched the dew on their hem.
If your life is a leaf that the seasons tear off and condemn
They will bind you with love that is graceful and green as a stem.


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NNVC - Why so special?

Not surprisingly one of the most frequently asked questions to me is about NanoViricides, if it is still my #1 Stock pick for 2009? Yes it is. What follows is a mini-treatise on what makes NanoViricides so special, courtesy of Dr. FG who posts frequently on the NNVC iHub board.

I've compiled a list of some recent answers given by him to FAQ's about the company and its prospects. But first, a partial excerpt from the Jain PharmaBiotech Report describing the science of NanoViricides.

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Re-published with permission from Dr. FG over at iHub:
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Excerpt from 2009 Jain Report: Structure and function of nanoviricides


NanoViricides are polymeric micelles, which bind to multiple virus-surface-receptors as antiviral agents.They are different from any of the other micellar nanotechnologies as there are no metal particles attached and the micelles can penetrate the virus and bind to multiple sites for effective destruction of the virus.

Mechanism of action of NanoViricides

For a virus to infect a cell, it needs to bind to more than one site. For example, binding of HIV only to CD4 on T cells is insufficient to cause sustained disease; it needs HIV binding to at least two and possibly three different sites on the T cell and that too, at multiple points. For an antiviral to be effective, it should match the strategy to bind to more than one site on the virus. Ideally it should block all of these to prevent virus from infecting the cell and multiplying. Most of the current antiviral drugs have a single mechanism of action and block a single receptor. Drug combinations from different categories are required to increase the number of receptors blocked. Still this is not fully effective.

In contrast to other approaches, a NanoViricide™ micelle can recognize and bind to more than one type of binding site on the virus. The NanoViricide™ system enables design of a drug that binds to more than one type of site - currently as many as three different sites, on the virus - for a highly effective attack. NanoViricides Inc terms this as "multi-specific targeting".

A NanoViricide™ drug goes much further than just blocking all of the binding sites of the virus. The base material of a NanoViricide™ is a specially designed polymeric micelle material. It has the ability to disassemble an HIV particle by itself. Thus, after coating the virus particle, the NanoViricide™ loosens the virus particle, and weakens it. Some virus particles will even fall apart (uncoat). This provides a further therapeutic benefit. NanoViricides plans to enhance the viral disassembly capabilities of the NanoViricides™ by attaching specially designed "molecular chisels" to the NanoViricide™. Once the NanoViricide™ micelles coat the virus particle, the attached "molecular chisels" will go to work. They literally insert themselves into the virus coat at specific vulnerable points and pry apart the coat proteins so that the virus particle falls apart readily. The mechanism of action of NanoViricide is depicted schematically in Figure 4-1.

This description is a simplification. There is no fully adequate explanation of the observed efficacy because the mechanisms of action of nanomaterials as drugs and particularly, NanoViricides in vivo, are multiple and somewhat complex. Targets for this approach include influenzas, HIV, HCV, rabies and other viruses.

Advantages of NanoViricides

NanoViricides have been compared to current approaches to viral diseases, which are seldom curative and some of the advantages include the following:

§ Specific targeting of the virus with no metabolic adverse effects on the host.
§ The biological efficacy of NanoViricides drugs may be several orders of magnitude better than that of of usual chemical drugs. This in itself may limit the potential for mutant generation.
§ There are also other key aspects of the design of NanoViricides that are expected to lead to minimizing mutant generation.
§ Nanoviricides are safe because of their unique design and the fact that they are designed to be biodegradable within the body.
§ The new technology enables rapid drug development against an emerging virus, which would be important for global biosecurity against natural as well as man-made (bioterrorism) situations. It is possible to develop a research drug against a novel life-threatening viral disease within 3-6 weeks after the infection is found, i.e. as soon as an antibody from any animal source is available.
§ It is possible to make a single NanoViricide drug that responds to a large number of viral threats by using targeting ligands against the desired set of viruses in the construction of the drug.It is possible to “tune” the specificity and range (spectrum) of a NanoViricide drug within a virus type, subtype, or strain, by appropriate choices of the targeting ligand(s).
§ The safety of NanoViricide drugs is proven now as they specifically attack the virus and not the host.
§ A variety of formulations, release profiles and routes of administration are possible.
§ Low cost of drug development, manufacture, distribution.

NanoViricide drug candidates are currently in preclinical studies. Clinical trials are planned. Initially injectable products are considered to be most effective but alternative routes of administrations such as nasal sprays and bronchial aerosols can also be developed. Various Nanoviricide products will be described further along with relevant viral diseases.

Advantages of Nanoviricides over vaccines are

§ Nanoviricides work where vaccines fail and are effective even when the immune system is impaired such as in AIDS.
§ Nanoviricides work where effective vaccines are unavailable
§ Sufficient short term protection for an individual outbreak cluster-
§ Treatment can be started after infection
§ No need to vaccinate whole world population for control of a viral epidemic

Advantages of Nanoviricides over immunoglobulin therapies are

§ Fully chemical, room-temperature stable NanoViricides can be made against many diseases.
§ Nanoviricides based on antibody fragment conjugates do not require humanized antibodies. Antibodies from virtually any source can be used for developing NanoViricides, thus significantly reducing time and cost of development.

Immunoglobulin therapies require the patient's immune system (complement system) to function well, which is often not the case in advanced disease states. NanoViricides function completely independently of the human immune system while accomplishing the same goal of reduction in viremia.
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FAQ's from Dr. FG:

>>And how many products do we presently have in animal testing now?

Presently testing--HIV, Rabies, EKC/Herpes. Scheduled or in testing--Ebola, Dengue, Flu/AviFlu.

>>How many do we think are in round two?

In round 2--HIV, Rabies, EKC/Herpes. We think also--Ebola, AviFlu. Ebola may be back in round 1 if the current testing is with a significantly altered version.

>>What's involved in completing a tox package?

Since the drug has never been tried on Humans before, the IND approval will be based entirely on the total results in animal testing. So, since so far test animals haven't shown reactions at therapeutic levels in the histological exams, pretty much increasing the dosage until 1) counter indications occur such as rashes, lesions, weight loss, loss of appetite, etc; and, 2) they begin to die. The test subjects will also be examined for other toxicity factors such as tissue damage, carcinomas, etc. Each test will run about a month plus data evaluation. Could be 1 test or could be 4 or more tests. It all depends on how the nanoviricide is classified. Considering its composition my best guess is it will be classified with monoclonals. That would be a fairly rapid tox workup.

>>The EKC testing took over a year to set up only and the testing in Japan has taken longer.

Some take longer and some much less time. The first EKC tests took less than 4 months from concept to protocol to results and data. The second round should start shortly, but is out of the hands of NNVC's management. As far as Japan goes, who knows what is happening there and do we really care? I'd say that with a major pharma MTA and potential exclusive world market, Japan's testing is far less important.

Ebola took only a few months, while Dengue has taken years due to funding, mishaps and probably politics. HIV has taken almost a year for the second round, while Rabies took a year, then only a few months for the second round, which was then greatly expanded back last October or November. So, generally, who knows, really.

>>I'm also bugged a bit that the stock we all think has so much potential to make history(and us rich) is NOT reflecting much of that potential after having been around for 3+ years,...

Though I agree with you in spirit, in reality who has ever heard of a biotech atrtup with 4 to 6 drugs still in pre-clinical studies, with no licenses (yet) valued at $70 million? Since the technology apears to be the only standard for valuation here, there has to be something to this technology to hold at that cap, yes?

One of the complaints I've heard from some VCs is they don't want to hand over $5 million at rates above 30 cents a share, and managenet doesn't want to dilute at rates anywhere near 30 cents a share.

>> I'd love to see $1 become the floor too.

And $1 seemed to be the floor (certainly 80 cents) way back last fall before the complete world econ collapse dragged the SP down with it. Where's the floor now? Maybe we will see it more clearly tomorrow.

>>Willing to wait the 2-3 years I think it will take for this to [finally] unfold.

So am I but with certain benchmarks in place. At least one product must complete another round of animal testing in the next 60 days. At least 1 product much complete a tox package by end of Q1 2010. At least one product must enter Phase-1 clinical studies by NNVC fiscal year end 2009/2010. Everything else in the interim will be a bonus.

>>The upfront and milestone payments from GSK to SNTA are different from the Royalty payments or "the split" that SNTA would receive IF/WHEN Elesclonal ever made it to the market, right?

Yes, the royalty payment (RP) is structured differently and separately from the milestone (MP) or "benchmark" payments.

The first deal will likely not get a big upfront payment, though I can see it easily between $5 million and $15 million. The second or third deal will likely be much larger. Part of the valuation for the upfront involves

1) risk, the perception of likelihood that the drug will make it through the process of approval

2) the current stage of development: Is the technology pre-development? Pre-clinical? Clinical? Has a tox package been done? Human trials? Phase-1? -2? 3?

3) Total market valuation and competition, a $10 billion dollar market is obviously more valuable than a $500 million market, and a market that already has 5 drugs is going to be less valuable than one that has no one and no current cures.

4) Amount of market penetration expected after approval, in a competitive market is the drug expected to have significantly greater efficacy? Or, will it simply compete against existing therapies and treatments?

5) The role the technology and/or drug plays in the expected final treatment. If the technology is one part of several combined technologies then the valuation will be lower than if it is considered the primary or single technology for a final treatment. If the drug is the technology, then it would have even greater value.

6) The track record of the company, has the company licensed other technologies? Does it have any of those technologies in process to approval? On the market?

The MP is also based on the above, with the addition of each defined milestone having added valuation based on the significance of the milestone as the technology or drug winds through the process.

The RP is based on the same valuations as the upfront payment. It also is usually structured with bonuses and bump-ups as defined by market penetration, total market and gross sales. Royalties might start out at 3% for sales under $50 million, then bump to 7% for sales between $50 million and $100 million and then 10% for all sales in excess of $100 million.

Let's do some amateur evaluating:

Looking at EKC/Herpes-cide, there are no effective treatments and currently no competition. The market is estimated to be between $1 billion and $5 billion with a likelihood of $2 to $3 billion (EKC alone is estimated to be greater than $1 billion). The technology offered is the drug. The drug is expected to ultimately emerge from trials and achieve market approval. The drug is not expected to go through a lengthy process for approval like cancer or influenza treatments.

On the other hand, the drug is still pre-clinical and pre-tox package. The drug may have to go through minor adjustments during the process to approval. There are competing technologies already in clinical trials, but have not yet emerged to FDA approval. The company has not established a track record and is still in the pioneering stage.

Here's what I get for EKC-Cide based mostly on looking at other licenses from 2005 and 2008:

Upfront payment- between $5 million and $15 million. The higher end will be more likely if NNVC has completed the tox package ahead of the final deal.

Benchmark totals- should range between $150 and $700 million over a 2 to 5 year period. This one is harder to call as there are so many factors, and especially that lack of a track record.

Royalty payment structure- Base RP between 5% and 10%. Bump-ups could make upper sales range payments 15% and as much as 25%. Most likely upper sales RP will be between 15% and 18% for this first drug.

Now do the same for amateur evaluation for HiveCide.

Giddy-up?

The market is about done working off its extreme oversold condition from the first week of March. If this chart isn't enough to convince, the giddiness on CNBC today should say it all.



The marked gapped up today and then struggled all day to gain any additional traction. The horizontal blue bar below represents strong resistance, hit early then and repelled prices repeatedly all day. The Wave Count below is five waves up into resistance and suggests at a minimum an ABC counter-trend reaction. The the big drop begins, this is how it will look.


The next big trade will be to the downside. The more the S&P rallies, the harder, faster and further it will fall. Once news-driven short-covering is over, whether it be a day, a week or another month (unlikely), the bull-trap will spring.

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Do you feel lucky?

The failed analysis of last night blew up in our shorts today as the market confounded three, count them three, Sell signals generated on Tuesday's close and instead rose up from it's gap down opening. What pray tell is happening?

The market thrives on uncertainty, making only the most nimble and dedicated traders survivors in a myriad of structural possibilities.

The one constant in all of this resides in this chart:


This is the Weekly SPX chart, suggesting that we are in an elongated 4th Wave that when complete will result in signficant new lows below the temporary bottom put in on March 6th.

Here is a Daily look at this 4th Wave rally and potential high level before the market turns down in earnest:




My analysis remains steadfast: That we are looking into the barrel of a loaded gun and the only thing missing is the timing on the pulling of the trigger. Yes, there is more upside shown on this chart, but do you really want to play it?

Well, do you?




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