Small Cap Network Blog

I know Hewlett-Packard’s (HPQ) news was good this morning, as was BJ’s Wholesale Club’s (BJ). Neither of those earnings results changes the bad ones we saw yesterday (the ones I referenced in a ‘Market Call’ blog entry). So, don’t get too excited….earnings are still a mixed bag.

I didn’t come here to talk about earnings though - at least not yet. Check back later in the day.

No, I came to talk about the other two big drivers behind the recent market rally…oil and the U.S. dollar. The former has been falling, and the latter has been rising. Both trends are generally good for stocks. And conversely, when both of those trends reverse, it’ll be tough on stocks.

Well, as you might have imagined, I think that’s what we’re about to see.

(There, I’ve just caught you up on about a week’s worth of commentary…literally.)

And where are both of those charts now? Oil is still finding support, and the dollar is still hitting a ceiling. In fact, we saw huge reversal bars (higher highs, lower lows, and a closing level pointed in the opposing direction) yesterday from both chart. A little follow-through today for either chart could clinch a reversal. Ergo, today’s critical.

I’m not going to rehash the specifics - the charts speak for themselves. These are as of yesterday’s (Tuesday’s) close. I’ll update both on Thursday when we get today’s final closing data.

My point, however, was to not get sucked in by today’s good news….there’s a lot of recovery to be made if the market’s going to stave off a pullback.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.

It had been a while since we heard anything from biotech company CEL-SCI (CVM), but that changed yesterday with a fat dose of encouraging news. Teva Pharmaceuticals (TEVA) has been signed as an exclusive licensee of CEL-SCI’s cancer treatment - Multikine - for Turkey and Israel. What’s interesting here is that Teva got on board even before Phase III testing for Multikine has started.

Of course, Phase III is mostly an FDA-mandated stage, so the same testing requirements may not apply in other countries before a drug is approved for public use. Even so, Multikine is not quite ready to be put on the shelf anywhere…at least not until some more efficacy and benefit data is gathered. So, for Teva to sign a contract at this juncture indicates a fair amount of faith that Multikine will indeed be approved in the two afore-mentioned countries. And, that ‘faith’ is also coming in the form of dollars - Teva is putting up some money for Phase III testing.

I don’t know how big the head-and-neck cancer market is in Turkey and Isreal. I’m sure it’s not the biggest market either company is eyeing. However, even a small market can get the revenue ball rolling.

The press release also mentioned something I think we should never forget about Multikine…all the work and regulatory hoop-jumping so far has focused on using the cancer treatment only for head-and-neck cancer. But, Multikine is also known to be effective for all types of tumors, regardless of location. It’s just particularly more effective than most alternative head-and-neck cancer drugs.

I think what the company is doing is taking the path of least resistance - a wise move. The drug has already been ‘fast tracked’ by the FDA, so the odds of getting it approved as a head-and-neck cancer treatment in most countries are very good. Once that happens, it’ll be much easier to win approval for its use against other tumors.

Good news? You bet. So what happens with the stock? It surges….for a few moments. Then it sank into the red and closed out with about a 10% loss.

If you’re asking how that can happen following the best news in months from CEL-SCI, you’re not alone. My answer is simple…when has the market ever been logical?

Specifically, I think what we saw as just a case where CVM had hit new 52-week highs, and impatient owners just started taking profits. That profit-taking, however, started an avalanche that tripped a lot more owners up along the way; I’m guessing there were a lot of stops around - and slightly above - 60 cents.

Here’s my take on the matter….eventually, all stock prices are justified. In the short run, they may or may not be. Personally I think CEL-SCI is a long-term holding anyway, since Phase III won’t be over for at least a couple of years. That’s why I don’t really care what happens in the meantime, good or bad.

On the other hand, other traders clearly don’t have the same point of view. They ended up being net sellers yesterday. Maybe it was a case of ‘buy the rumor, sell the news’ (though it was the fastest case of it I’ve seen in a while).

Either way, whether you’re an investor or a trader, I don’t think Tuesday is the day to worry about. I think today (Wednesday) and the next few days will really tell the tale. Hyper-volatility can skew the true picture.

Are you a subscriber to the Small Cap Network newsletter? If not, you’re missing out on some great trading ideas and exclusive market commentary. To sign up, just go to the top right corner of any page of our website. You’ll be joining thousands of other subscribers who have already benefited from our news and views.