Saturday, April 21, 2007

Neurochem (NRMX)

Neurochem (NRMX)SocialTwist Tell-a-Friend
David Miller

Keep an eye out on Neurochem (NRMX) today. The option prices have been very high on this one because it has become yet another battleground stock in the biotech sector. The company’s Alzheimer drug, Alzhemed, has been derided and praised on Wall Street, and the biotech bulls and bears have been shooting the heck out of one another for months in the name.

This morning the company announced, in quite an impressive press release, that their primary analysis of the trial had failed. They blame imbalances between the treatment arms for confounding the results. They are going to an alternate analysis, which we presume is a Cox regression analysis, that has the ability to account for and correct those imbalances.

The problem is that when a primary analysis fails, the FDA can choose to ignore any subsequent analyses. The company is careful to say in their press release that the Cox analysis was prespecified, but there can be a great deal of variation in what “prespecified” means in terms of what the FDA might accept.

Bottom line is the trial failed at the first look and it will take several weeks to get it straightened out.

Look for options players to start rolling their May positions out a strike or two and for the action in the stock to be wild. Is this the next Dendreon (DNDN)? I doubt it but we have to wait and see what the data are and hope we can get a straight story from management on exactly how “prespecified” this Cox analysis was.

Monday, April 16, 2007

Equity Index Update

Equity Index UpdateSocialTwist Tell-a-Friend
Brad Sullivan

And the Midcap 400 shall lead them. Was it not just 6 weeks ago that the market suffered from an intense bout of “forced” liquidation? Now, here we are looking at new all-time closing highs in the Midcap 400 Cash index and watching the remainder of the indices get within shouting distance of their 2007 highs. The NDX was helped by comments from the CFO of CSCO when he stated that earnings would be towards the high end of estimates during Friday afternoon. The stock immediately shot from 26 to 27 and provided the lift needed to boost the index market on a quiet Friday afternoon.

This morning the indices are called higher based on several factors. First we had strong rallies in the Asian markets and that has carried into European trading. In addition, Sallie Mae agreed to a private buyout that put a nearly 50% premium on the stock. Finally, earnings from two key banks C and WB were much better than anticipated.

Of course, we cannot forget our old friend the currency market which was given the all clear signal from the G7 over the weekend to continue the “carry” trade with abandon. Indeed, overnight the Euro/Yen continued through its respective all time high and the USD/Yen appears not too far behind. This liquidity driven currency trade has produced one of the key elements for tracing index moves both domestically and abroad. Simply put, comments out of the G7 meeting show just how sensitive the central banks of each nation are when it comes to the carry trade. Given the tremendous growth of funds using this trade over the past several years, it is easy to imagine how ugly a liquidation of this trade would end up being for the global markets. Indeed all one has to do is look at charts from last spring and a few weeks ago when hedgies were forced to liquidate positioning under “margin call, gentlemen” types of situations. Nobody wants that again, and the banks appear both coordinated and committed to ensure that the “carry” will not end the game.

This morning there is a potential early setup on the buy side. Even with are sharply higher open, players have been getting used to selling the open and getting long somewhere in the first hour for a walk the line rally. If players get caught trying this and the dealers come in on the buy side, look for significantly higher pricing in the first hour.

Finally, the final 2 hours of Friday’s session produced a significant volume increase in the SPminis and ER2 contract, when compared to their respective YTD and 5 day averages. Considering we settled on the highs of the session, this week looks potentially quite bullish.

Sunday, April 15, 2007

Outlook for the US Dollar

Outlook for the US DollarSocialTwist Tell-a-Friend
Sally Limantour

The dollar was at this level back in the 1978.. We have tested this area a number of times and there are two predominant perceptions right now.

The dollar will be supported down here. Going back to charts in the 1970’s there have been 4 times we have tested this level and bounced – 1978, 88, 92 and 05.

Here is the logic:

Foreigners currently own roughly half of our Treasuries and securities and are Buying over a trillion dollars worth every year. It is in their best interest to not let the dollar fall much further.

The other idea is that many other countries have interest rates that are higher than the US and their currencies are more attractive.. Britain, Germany, Australia and others are all higher and their ministers of finance are talking more about concerns over inflation and raising rates to control it. The US, however is still hinting at lowering rates in the future to offset a weak housing market.

So this is the dilemma and we have to watch this closely as it will have repercussions for many markets.

While I hold CD’s denominated in different currencies ( as a way to be short the dollar), I am eyeing a potential short term trade of going long the dollar. On Friday morning, looking at the Market Profile chart we had a high level of trade occur at 81850 and I went long. It took off and I aggressively moved my stop up and captured a good part of the move and am now flat.
(see Market Profile chart – look at 4/13 and see where the horizontal line is longest at 81850. It then gapped up and traded crazy before settling at 81950.) This technical set up together with the chatter getting loud on dollar bashing while talking up the Euro (German exporters calling for 1.4000 in the euro) made me get a bit contrary in the morning).

Options may be the way to play this as a way to get long with a good risk/reward strategy. I am still bearish the dollar in the big picture, but it may be overdone and the first perception mentioned may move the market higher.

The following charts are:

1. Long term chart of US Dollar

2. 30 minute chart of US Dollar

3. Market Profile of US Dollar

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