ACAD Pharmaceuticals + 23.91% Today

We started buying ACAD in February and wrote about it here ACAD Pharmaceuticals - ACAD.  Today ACAD advanced 23.91% on heavy volume of 22 million shares.  The company was a presenter at the (AAN) American Academy of Neurology yesterday and reiterated the November Phase 3 results of Pimavanserin.  

ACAD has to just duplicate the prior phase 3 trial they completed in November, and if they do data should be good enough for FDA approval. They will be starting that trial by April and finish the trial by the end of 2014. The lead drug Pima will also be tested for (ADP) Alzheimer's Disease Psychosis in the second half of 2013. The long patent life to 2028 makes the company a good takeover target for large pharma sometime in the next two years. 

Year to Date Asset Performance

One would think that with the amount of stimulus the Federal Reserve has been printing, that commodities and perhaps precious metals would be the benefactor of such stimulus along with stocks.  From the chart below, it looks like only stocks have received the share of appreciation rising roughly 9% year to date.

Stocks (SPY) has outperformed copper (JJC), soft commodities (JJG), oil ($WTIC), gold (GLD) and bonds (TLT) by a wide margin.  With these type of returns there would be little reason to stop the asset purchase programs currently running as long as inflation is kept in check.  Of course bonds selling off creating rising bond yields is not the ideal response that the Fed wants to occur either.  Bond yields are too low at present to worry about that scenario playing out.

Bottom Line:  The stimulus of 85 billion a month in a combination of mortgage backed securities and treasury purchases have had a positive effect on stocks, and a muted effect on other asset classes such as commodities, precious metals and bonds, putting the stimulus programs in the sweet spot for now.  I think any market pullbacks will be in the range of -3% to a -4% sell off in the intermediate term.  Thank you for reading.  

New Market High

A new market high was achieved this week depending on which index you follow.  Below is the Dow Industrial Average Index.  This week marked a new high on that index eclipsing the 2007 high of (14,198).

Although we have reached new all time highs in the market, the important thing to note is where does the market trade from here, until the rest of the year.  As of today the Dow is up about 9% as of this writing.  

Bottom Line:  Stocks on a P/E basis are not expensive at a projected (13.6) - 2013 earnings, below the historical P/E average of 15.  Against ultra low treasury yields, stocks can be deemed relatively cheap also.  I expect some market pullbacks to be short lived in the range of -3% - 4% the rest of this year as there is plenty of Fed induced liquidity waiting to enter the market.  Thank you for reading.  

Mixed Market Picture

A truly mixed picture as far as technical analysis is concerned.  So to the charts we go.

The NYSE Summation index above is already on a sell signal as it has crossed below it's moving average.

The chart above is the NYSE advance divided by declining stock ratio.  As near term history shows the market is a buy when this ratio drops below the 1.2 number.  At present there is not an edge either way to add long or short.

Above is the TRIN index.  This is a shorter term index that measures advance and declining issues and volume.  There is no edge long or short for the near term.  

This last chart is the USD index long exchange traded fund on a weekly basis.  I have shown in the past that a stronger dollar has been a detriment to stocks rising and a weaker dollar is a benefit to stocks.  In the long term a rising dollar signals a stronger economy.  The fact that the market has been strong despite a rising dollar gives merit to the strength of stocks at present.  

Bottom Line:  We have a strong trending market on an intermediate term basis, with some indicators (like the NYSE Summation Index) above signalling a change in trend should have already occurred or is about to occur.  Also the NYSE Advance / Declining stock ratio above, there isn't an edge either way, to placing new long or short positions today on the indices.