Friday, August 21, 2015

Indicators Are Lining Up For More Than Just A Correction

I generally don't try to time normal corrections in the market, but I get more defensive when more major tops threaten. Now is such a time. I've been dialing up defense the last couple weeks, and I think the sell-off of the last couple days may be intensified into September. I haven't had time to write much about this here on my blog, but I did publish an article How Afraid Should We Be Of The Margin Debt Climb over at Seeking Alpha. This was an exclusive article, meaning I can't publish it anywhere else, so you will have to go there to read it.

My basic point was that there are too many good predictors lining up for a crash to be business as usual. Coincident with that I am changing the Smartphone Index I keep here at the blog to cash, as well as the portfolio.

The market instability that's coming on could get pretty dangerous with a lot of it swirling around debt and currency issues, meaning it could quickly become "systemic" as it did in 2008. I noticed on Fast Money last night they were talking about the race to devalue (not just the China move recently) and how it all seems to have started this round on May 2014 with the ECB's blitz of money printing. I have never been a fan of money printing, and I wrote an article attempting to project where it could all go back in 2012 A Triangulated Forecast For June 2013 wherein I projected where the money printing trend would become dangerously unstable. I was seeing a gold price move up along with the printing that hasn't happened, but the printing blitz has also involved a gold manipulation blitz.

My 2013 article was basically about the likely outcome of a global debt reset sometime after money printing destabilizes. It has been destabilizing for the last couple years and now be the start of the "reset" involving much market distress beforehand. Last night's Fast Money commentary featured the remark that currency moves that used to take 6 months are now happening in just hours. This idea of a global jubilee (or Shemitah as was the subject of the 2012 best-seller The Harbinger) has been bandied about for many years now, and if it plays out per the timing of Sabbath 7 year cycling, it will involve a lot of market turbulence in September. So far, the 7 year cycling has been dead on. In September, 2001 we had 9/11 and for the first time in America's modern history, Wall Street was shut down for many days. Seven years later we had the crash of 2008. It is now 7 years after that and the jubilee may be at hand. There are a lot of critics of Jonathan Cahn's book, but what are the odds of the 7 year timing we've had thus far being just pure coincidence?

As for gold, a subject of my 2013 article, The twin parabola fractal may still play out, because the divider downtrend may end up being about four years, which would put the second parabola starting about now. If gold is to follow money printing exactly, the separator would be a little over three years according to the chart I showed for the eight central bank balance sheets as a percent of global market cap. If gold were to take off now into the second parabola here in late 2015, four years after its late 2011 peak of the first parabola, it would be following pretty closely this money printing formation allowing perhaps for the manipulation blitz.

The manipulation of gold may come to an end if a jubilee debt reset takes place and the financial world is reorganized. So what role gold would play or at what price is really unpredictable. The most likely direction would be up you would think, but who knows. I don't think gold would have the safety factor traditionally given to it in such a scenario.

Whether the current market turbulence is a beginning of such a development is far from certain. If money printing can continue with some stability, we still have a slow, stable recovery proceeding, and we will have very low interest rates for some time, and we still have US retailing wanting to lead the markets higher as is evident from a glance at the RLX. But the current situation certainly calls for a boatload of caution.

Sunday, August 2, 2015

For Those Of Us Who Missed Puma

Puma Biotechnology (PBYI) was one of those legendary rocket rides in this thrill park of biotech that you want to buy in clear 20/20 hindsight. It is a development stage company working mainly on neratinib, a drug for breast cancer among other things, and its prospects moved the stock out of its slumber for its first couple months as a public company in 2012, into a wild ride up from around 20 to 260 in about two years. "Where was my buy order in 2012?" you have to ask yourself.

Well maybe the market is giving us a redo on that. There is another small, little known biotech working on the same thing and, if it makes you feel any better, Puma's neratinib has fallen on hard times as reported in the 2015 ASCO Conference. The drug is now showing some 2.3% more effectiveness than placebo with the added benefit of severe diarrhea. This news has crushed PBYI from 260 back to around 85: (click on image to enlarge)

Neratinib is not the only iron in the fire for Puma, but as this chart clearly shows, the market places a very high value on what happens to their breast cancer efforts. The incredible climb in the stock is now very broken.

Enter Oncothyreon (ONTY) and their similar effort against breast and other cancers. Their story is just the inverse of Puma with the stock sliding since 2012, but with a stunning reversal after some very promising data released just before ASCO this year:

The two are so similar that the developments of this year are creating some internet buzz about PBYI and ONTY being a pair trade, shorting PBYI and long ONTY, with talk of ONTY being the new Puma. I like ONTY technically and the insiders at the company have started liking the stock also lately with several million dollars worth being bought up over the last year or two by a variety of people. The "IH" (insider held) number is still a little too low for my taste (only around 8%) but this tiny company could possibly start attracting some more serious insider buys. The quiet consolidation it has been in the last two months showed virtually no response to the market correction - nice strong handed behavior that typically precedes nice climbs, if the other technicals are good.

So if you missed Puma and are willing to deal with the risk, you might want to look at ONTY as a redo.