The much anticipated Fed’s Jackson Hole Economic Symposium came and went. The market took it as a non-event because Fed Chair Powell was dovish as usual. Powell mentioned that taper is coming but interest rates will remain low for a long time. The next Fed policy meeting is September 21st, which is about three weeks away.
The market is wildly expecting the Fed to announce taper in the September meeting. Tapering will take liquidity out of system and will have a huge impact on the stock market valuation. Many stocks have been artificially inflated/supported by the easy money policy. When the money gets tight, there will be many of the skeletons in the closet exposed. It’s difficult to say if the market will correct before the taper as a discounting mechanism or correct after the taper as a reactionary mechanism.
Look at the NASDAQ weekly chart below, you will see that the chart is very bullish as if it is starting a new weekly cycle. If indeed the NASDAQ concluded the weekly cycle on 08/19/2021, then it is now one week into the new weekly cycle. It would be 4 weeks in the new weekly cycle by September 21st. If the market turns down on the 4th week in the new weekly cycle, that’s a bearish weekly cycle (turning too early). We shall expect a sizable correction which fits the seasonal pattern.
We want to emphasize that we are in a bull market. This pending correction is only to be used for adding new money in the market. We are not looking to short the market. It is just too difficult with so much liquidity in the system. By default, the market does up 2/3 of the time. It’s far too easy to trade on the long side than short.
We have blogged about KPTI before and we are still holding a small KPTI position.
Karyopharm Therapeutics Inc. (KPTI) is a commercial-stage pharmaceutical company pioneering novel cancer therapies and dedicated to the discovery, development, and commercialization of first-in-class drugs directed against nuclear export for the treatment of cancer and other diseases. Karyopharm’s Selective Inhibitor of Nuclear Export (SINE) compounds function by binding with and inhibiting the nuclear export protein XPO1 (or CRM1). Karyopharm’s lead compound, XPOVIO(R) (selinexor), is approved in the U.S. in multiple hematologic malignancy indications, including in combination with Velcade(R) (bortezomib) and dexamethasone for the treatment of adult patients with multiple myeloma after at least one prior therapy, in combination with dexamethasone for the treatment of adult patients with heavily pretreated multiple myeloma and as a monotherapy for the treatment of adult patients with relapsed or refractory diffuse large B- cell lymphoma. NEXPOVIO(R) (selinexor) has also been granted conditional marketing authorization in combination with dexamethasone for adult patients with heavily pretreated multiple myeloma by the European Commission. In addition to single-agent and combination activity against a variety of human cancers, SINE compounds have also shown biological activity in models of neurodegeneration, inflammation, autoimmune disease, certain viruses and wound-healing. Karyopharm has several investigational programs in clinical or preclinical development. For more information, please visit www.karyopharm.com.
KPTI crashed badly since March 2020 after the company announced BOSTON clinical trial data. The recent low at 4.42 is a re-test of the all time low at 3.92. The price at 3.92 in March 2019 reflected the maximum risk–a binary outcome before its first FDA approval. The shorts has been pounding on KPTI stock because hot money has been trading in hot COVID beneficiary stocks. KPTI is not a cyclical stock that would have a day in the sun because of the endless rotations. KPTI was left to die because the market believed KPTI can’t launch a new cancer drug in pandemic.
But it’s not dead. At 4.42 low point, KPTI has three FDA approvals, making about $100M/year, plus all the clinical advancement in the US and APAC since March 2020. Technically, it is very bearish. It is just crossed above 10-day moving average. 50-day moving average is at 8.04, that’s 43.5% above its current price. There are two ways to reverse the extreme bearish trend:
1. slow reversal — price action churning and basing for a while because it is an extreme valuation safe zone, not much fluff in the price, it’s all value.
2. fast reversal — price trading violently up based on external events such as buy out/partnership or extreme good clinical news.
One can never underestimate the power of fear in the stock market. The shorts really dished out extreme fear in KPTI to take the price near its all time low.
It has been five trading days since the new low 4.42 was made. The price turned around in the absence of news. If there is no significant news coming, it will then churn and base around this low. There are a few things might be coming its way, but the significant catalyst is the solid tumor clinical trial SIENDO outcome to be announced in second half 2021.
The company didn’t have any failures in clinical trial since March 2020. The only sin is launching a new cancer drug in pandemic when people’s regular healthcare have been interrupted by the long lasting COVID pandemic. If you are a value investor, this is the price you should open a new position and hold for at least one year. If you are a momentum trader, you should avoid this stock.