Mid Week Update

This is a confusing market that is being juiced with plenty of liquidity from the fed.  Below are a few charts as we tread the volatility the last few weeks.

The TRIN index above is a breadth indicator that compares advancing and declining stock issues and trading volume.  With today's move higher we are very overbought.  I expect some consolidation in the next couple of days to work that indicator off it's overbought readings.

The NYSE Summation Index above has given a sell signal as it has crossed through the moving average.  With the volatility as it has been the last few weeks, we can potentially move above that moving average in the next week or two.  

After yesterday's and today's move higher, I would have expected the put/call ratio to also elevate much higher also to complacency levels. The level is just above the neutral line where there is not much edge either way as to the high complacency or panic in the market.  

Bottom Line:  Today was a strong day for the markets led by some improved economic data.  I expect we see new market highs in the coming weeks with continued better data, and plenty of liquidity via the fed.  Thank you for reading.   

Acadia Pharmaceuticals ($6.09)

ACAD focuses on small molecule drugs that address unmet medical needs in neurological and related central nervous system disorders.  The lead drug Pimavanserin will be conducting another phase 3 for the treatment of Parkinson's Disease Psychosis (PDP).  The company announced positive results for a just completed phase 3 trial for Pimavanserin in November.  The FDA has requested a repeated phase 3 trail similar to the just completed phase 3.  The company plans to launch that second phase 3 by April.  They will also be launching a phase 2 trial for Alzheimer's Disease Psychosis (ADP) the second half of 2013.

The chart above is a 60 minute two month chart.  The stock has been consolidating over the past 13 days between the range of 5.80 - 6.40. The longer the consolidation lasts the greater the potential move once it breaks out.  

Bottom Line:  ACAD has to just duplicate the prior phase 3 trial they complete in November, if they do data should be good enough for FDA approval. They will be starting that trial by April.  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.

Trending Higher

Stocks, commodities, high yield bonds, and precious metals have shown the propensity to drift higher behind the fuel of liquidity injections from the Federal Reserve.  So despite a global economy that has remained sluggish, stocks can rise nevertheless.  That is exactly what we have been experiencing here and abroad.  Below are a few charts that have given some shorter term sell signals.

Notice the breadth indicator, known as the Summation Index above, is at the point of crossing below the moving average.  Typically this will signal a weaker stock market in the future.

The chart above has the record high index in the upper pane and the S&P 500 in the lower pane.  The record high index has equaled the two year high and is trending sideways signalling exhaustion.  

Finally the VIX Index which has been referred to the fear gauge is at complacent multi-year lows and trending lower.  There is not a lot of fear in this market at the present time.  

Bottom Line:  Markets continue to make new highs despite the above charts signalling either complacency, or overbought readings.  I expect market highs to continue, as we are experiencing a new paradox in capital markets where induced liquidity, and currency depreciation are a top priority among central banks worldwide.  The liquidity injections and weaker US Dollar have aided the S&P 500 in moving higher.  Thank you for reading.