March 23, 2020 8:41am
Envision a return to fundamentals-it’s coming and start early
Unfortunately, those companies that need or are desperate to jump through the public funding “window” better think not twice but, five times and have a better than good “story” to attract investors
Pre-open indications: 4 BUYs and 2 SELLs
March continues as a rollercoaster theme month – my version of the morning’s forecast is written to what I anticipate is about to happened
Dow future are UP +2.38% (+454 points), S&P futures are UP +2.76% (+63 points) and NASDAQ futures are up +3.66% (+255 points)
U.S. stock futures are up after a severe downside as we wait for an agreement as Fed promises aggressive asset purchases to support markets;
European markets tumble as the coronavirus continues to take its toll with the Stoxx 600 down -4.5%;
Asia Pacific markets fell steeply although the Japanese Nikkei 225 jumped 2.02% while the MSCI Asia ex-Japan index fell 5.19%.
A session where futures were well off their pre-market worst levels and starting to climb to the upside as the Fed initiated asset purchases and stimulus negotiations continuing.
· Futures had hit their “limit down” levels, falling 5% as the pre-open evolved;
· Downside limits to futures contracts are implemented to ensure orderly market behavior once trading hits a certain threshold. No trades below that level are allowed.
The ferocity of a 30% decline in U.S. markets and “our” universe of cell and gene therapy companies had not been foreseen or experienced by many investors.
Cell and gene therapy equities are not easy to BUY however, sector stocks should start being “stalked” as some are on their way to having completed their decline.
Review last week’s CBOE Volatility Index (VIX): it traded down, is it waiting for a less volatile session?
· Friday -5.96 points or -8.28%,
· Thursday’s -4.45 points or -5.82%,
· Wednesday’s up +0.54 or +0.71%,
· Tuesday’s down -6.78 points or -8.20% at 75.91 and
· Last Monday’s highest volatility close at +24.86 or +42.99%.
Consider, the IBB weekly “journey” of closes: it also traded down
· Friday’s down -3.02%,
· Thursday’s up +2.78%,
· Wednesday’s down -2.93%,
· Tuesday’s up +7.32% and
· last Monday’s down -8.96%.
Then compare the travel of the XBI: and the alternating sessions of negatives versus positives
· Friday’s down -1.45%,
· Thursday’s up of +5.76%,
· Wednesday’s down of -2.94%,
· Tuesday’s up of +3.61% and
· last Monday’s down of -12.53%.
As both have a relationship with the alternating Advance/Decline (A/D) lines: think pops versus slopes
· Friday’s 11/23, 1 flat,
· Thursday’s 30/5, 0 flat of 35,
· Wednesday’s 10/25, 0 flat;
· Tuesday’s 26/9, 0 flat and
· last Monday’s 1/34, 0 flat.
Where am I going with these stats – the lack of any measurement tool other than volatility and randomness “could” mean a slow return to fundamentals!
It’s casino-based buying, be prepared for short-term losses but, near-term gains: my same old thesis – “when you’re on a roller coaster, the only thing you can be sure of is you’ll end up back where you started.”
So, be imaginative in considering explanations for the lack of or confusing and often contradictory data. Patterns can help in identify biases and expectation of what the data might/should/could show – I own it and have been right more times than wrong having learned from missteps!
Hedge funds have been shorting this market; another contributor beyond the algorithmic electronic trading sources of downside pressure however, it seems time for a turn!
Sector stocks have been making new lows; when the S&P declined Friday, I perceive some recovering market breadth and lower volume than prior sessions.
As I have stated, I deal in indications which can be a development of almost any kind. Specifically, it may be a confirmed fact, a possible fact, an absence of “something”, a fragment of information or even an observation.
Reiterating, the sole provision of an indication is that it just might provide insight into this “deranged” market unfortunately, the influence the algorithmic/electronic trading has skyrocketed selling!
· As we have seen in these past weeks, as virus testing becomes more widespread, the number of confirmed cases rises, an indication will begin to emerge of the pace of the spread of the virus. Cumulative case count, don’t account for how many patients have recovered or the lags in reporting cases and differences in reporting methods. Delaying the spread of the virus “can” mean the difference between delivering care to all those patients who need it.
Coronavirus, Chinese, Wuhan virus or COVID-19 numbers …
· U.S. cases: 26,747
· U.S. deaths: 340
The rapid increase in the distribution of coronavirus test kits in the U.S. will likely accelerate the pace of reported and confirmed cases … testing will be better able to track the pace of the pandemic’s spread to allocate supplies to areas where the pandemic is spreading quickly. <CNBC>
Today’s and tomorrow’s relevancy … Ben Graham used to talk about “the stock market being a cross between a voting machine and a weighing machine”.
Friday night’s title: “whiplash, fear, panic and quadruple witching fuel volatility. Stop the slide of a tilted “floor” of share pricing which is subsidized by market emotions until they are put in check by an infection reduction and vaccine or therapeutic.”
· the NASDAQ closed DOWN -271.06 points (-3.79%)
· the IBB closed down -3.02% and XBI also closed down -1.45%
· the range of the 11-upside was +0.54% (VSTM) to +55.03% (BSTG) the 23-downside ranged from -0.21% (FIXX) to -22.97% (BLFS);
· 7 out of the 11-upside had higher than the 3-month average volume;
· 20 out of the 23-downside had higher than the 3-month average volume;
· March registered 9 negative and 6 positive closes
· February registered 9 negative, 9 positive closes, 3 vacation days and 1 holiday.
· January registered 9 negative, 10 positive closes and 2 holidays.
· December registered 11 negative and 10 positive closes
· November registered 8 negative, 12 positive and 1 holiday closes;
· October registered 14 negative, 10 positive and 1 neutral closes;
Companies in my headlights – It’s your decision; I provide an idea and context:
Pre-open indications: pull back for a better prepared position - save the portfolio!
· Pluristem (PSTI closed up +$0.11 to $3.39). March saw six (6) seriously down sessions to $3.12, $3.04, $3.08, $2.89, $2.94 – overbought on panic and pandemic issues and spotty news;
· Athersys (ATHX closed down -$0.07 to $1.78 after being up +$0.43 but, ATHX’s spotty pricing and endless financings. ATHX had lows of $1.19, 1.22, $1.17, $1.21 and four (4X) time at $1.22 having opened 3/2 at $1.22 – NOT a believer;
· BioLife Solutions (BLFS closed down -$2.72 to $9.12, with larger (352.1 K) than 3 months average (192.5 K shares) shares traded, short-term is positive. 3/2 trading price was $14.36 and twice traded down to $8.36 and $8.64 during March. A 52-week low of $7.37 versus a high of $21.18 sends a message, in my mind a target of a potential acquisition (but, they in the past wanted cash) by its market’s positioning;
· Ionis Pharmaceuticals (IONS closed down -$2.49, another with larger volume (1.035 M shares traded> versus 3-month average (972.8 K shares) - oversold;
· CRISPR Therapeutics (CRSP closed down -$0.61 to $38.96 and was priced at $53.35 on 3/2 as large trading volume enhanced trading viability – oversold;
· AxoGen (AXGN closed down -$1.19 to $8.38. A steady decline of since 3/16 as the stock opened 3/2 at $11.88 – oversold;
Opinions expressed are those of the author and are subject to change, and not intended to be a forecast of future events, a guarantee of future results, nor investment advice.
Whether information or intelligence is good, bad or somewhere in between; I put into context what is relevant and useful for investors. All investments are subject to risks. Investors should consider investment objectives.
Henry McCusker, the editor and publisher of RegMed Investors does not hold or have positions in securities referred to in this publication.