Page 192 - Mad Hedge Fund Trader

December 20, 2024

(WHAT’S THE MARKET’S NEXT MOVE?)

December 20, 2024

Hello everyone

This will be my final Post for the year. I am taking a well-deserved break and will return in around mid-January. I will keep one eye on the markets, and if I see anything that is worth acting on, I will send out an email. But, for the most part, I will be taking a break from screens and market research.

I want to wish you all a very happy festive season and all the good things for 2025.

The Fed meeting certainly has set the mood for the markets. Investors were disappointed with what Powell said about rate cuts in 2025, that there would probably be fewer than first thought. The markets turned up their nose and smacked every sector – basically throwing a hissy fit because they didn’t get what they wanted. But really, this was a good washout – what you would call a very healthy correction. It had been building for a while. I pointed out in Monday’s Post that the technicals were very bearish, and risk was rising.

So now what?

We can now argue that further downside is possible. You should not be trying to catch a falling knife at this stage. We could see another few weeks of consolidation, sort of like a topping action. Nearby resistance is seen at 5935/45 and 5980/90 (both a 50% retracement from the Dec 6^th high at 6100 and the broken bull t-line from August.)

So, what’s possible: eventual downside to that bull t-line from October 2023 (5595/20) but some scope for a few weeks of consolidating as year-end approaches first.

Strategy: too late to sell now. Instead, sell on a close below 5845 (just below support). Stop should be above 5885.

Long-term outlook: further downside is probable to the base of the rising wedge (5595 or so). Rising wedges are viewed as reversal patterns, with a break/close below the base arguing a downside resolution and more major top (for at least a year). We have had an extremely overbought market after the last few years of sharp gains. So, it is important to understand that the potential now for a downside move is increased.

And one more thing in relation to the overbought market. We could see a sub $5000 S&P500 in 2025. It is possible. I have been saying for quite a while now that we would get a correction in 2025. It just started earlier than I had anticipated.

Strategy/position: We could see one more rally to just above $6100. That is where you want to be selling calls on the SPY and/or buying the SDS. (Make sure you have stops in place.) Also, if you want to scale out of any stocks, that is the time you would do it. The market will rest for several months to a year but will come roaring back eventually.

I have already recommended that you sell calls on the precious metals sector. It is possible all sectors will follow the bearish path because the run-up has been so strong over the last couple of years.

After the 2025 year of strong correction, we are likely to begin another rally on to new highs.

Bottom Line: 2025 could be a volatile year.

Cheers

Jacquie

Trade Alert - (VST) December 20, 2024 - EXPIRATION AT MAX PROFITS

Trade Alert

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more

December 20, 2024

Diary, Newsletter, Summary

Global Market Comments
December 20, 2024
Fiat Lux

Featured Trade:

(THE EIGHT WORST TRADES IN HISTORY)

December 19, 2024

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
December 19, 2024
Fiat Lux

Featured Trade:

(SURVIVAL OF THE SOLVENT)

(KOD), (GOSS), (BLUE), (SIOX), (CDAK), (GLPG)

Survival Of The Solvent

Biotech Letter

The biotech industry likes to measure success in breakthroughs, but 2024 taught us to count it in survivors.

Sure, we saw remarkable wins in schizophrenia and obesity treatments - enough to keep Big Pharma writing checks that would make anyone pause.

But those layoff numbers? They keep climbing, and I've seen enough market cycles to know what that means.

Yes, the Nasdaq Biotechnology Index eked out a 5.4% gain in 2023, but don’t let that calm surface fool you.

Beneath it, some companies were taking on water faster than a paper boat in a tsunami. It’s not exactly the environment to make your local biotech cheerleader grin ear to ear.

Still, there is value in understanding what went wrong.

Take Kodiak Sciences (KOD) - and I mean that literally because the market sure did. They watched their high hopes for an age-related macular degeneration treatment encounter the brick wall of trial results that proved no better than existing standards of care.

The market’s reaction was swift and merciless, erasing more than 70% of Kodiak’s valuation. Back in my hedge fund days, we called this kind of drop a "character-building event."

Then there's Gossamer Bio (GOSS), which missed its endpoints in pulmonary arterial hypertension so badly you'd think they were aiming for a different disease altogether.

They learned the hard way that lofty ambitions can deflate at high altitudes when critical endpoints fail to materialize, leaving the company staring at a gaping hole where investor confidence used to be.

Bluebird Bio (BLUE)? They've been playing regulatory red light green light with their gene therapy platform.

Despite having the science that could make this possible, they struggled to justify the hefty R&D spending necessary to bring complex and costly treatments to a market that can turn stingy when results arrive late and uncertain.

Speaking of tough breaks, Sio Gene Therapies (SIOX) discovered the cruel reality that neurodegenerative pipelines rarely behave the way spreadsheets say they should.

And poor Codiak BioSciences (CDAK) - their exosome therapy platform imploded so spectacularly that they were forced to declare bankruptcy.

Even Galapagos NV (GLPG) found itself stuck reassessing once-promising late-stage candidates. Those strategic alliances they bragged about last year aren't looking quite so strategic anymore, either.

It would be easy to pin the blame on management missteps or scientific overreach, but the numbers are showing something else.

FDA’s Center for Drug Evaluation and Research did not exactly smile on the biotech crowd’s ambitions. In 2022, it approved 37 novel drugs. By December 2023, fewer than 30 had made the cut.

Want more sobering statistics? The probability of a drug making it from Phase I to FDA approval sits at 7.9%. In immuno-oncology alone, we've got over 1,500 active trials fighting for attention. Overcrowding would be an understatement.

Meanwhile, global biopharmaceutical R&D spending topped $200 billion in 2022 - that's a lot of investor cash burning through labs with no guarantee of return.

Remember the IPO party from a few years back? Well, 2023 saw fewer than 20 biotech IPOs brave the public markets. That's not caution - that's fear.

For those still interested in this sector - and I know you're out there - some of these disasters might offer lessons, or even opportunities.

The iShares Biotechnology ETF exists for those who prefer to spread their risk. Smart move, considering what we've seen this year.

Let's talk specific names. Bluebird Bio might still have a chance if they can get their regulatory act together and convince insurers to cover their therapies.

Sio Gene Therapies could find new partners - though I wouldn't hold my breath. Galapagos has Gilead (GILD) in their corner, which counts for something in this market.

So here's my take: hold Kodiak if you can stomach more volatility - they've already taken their biggest hits.

Same goes for Bluebird Bio, but only if you've got patience. Galapagos? Keep it, but watch those pipeline updates like a hawk.

Gossamer Bio? Time to consider an exit. Sio Gene Therapies lacks catalysts, and Codiak - well, bankruptcy speaks for itself.

The lesson from Kodiak, Gossamer, Bluebird, Sio, Codiak, and Galapagos is simple: brilliant science means nothing without solid analysis, realistic timelines, and serious cash. 2024 proved that point six times over.

Sure, everyone in biotech wants to change the world. The hard part? Staying solvent long enough to make it happen.

Trade Alert - (BAC) December 20, 2024 - EXPIRATION AT MAX PROFIT

Trade Alert

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more

Trade Alert - (C) December 20, 2024 - EXPIRATION AT MAX PROFIT

Trade Alert

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more

December 19, 2024

Diary, Newsletter, Summary

Global Market Comments
December 19, 2024
Fiat Lux

Featured Trade:

(A CHRISTMAS STORY),
(THE U-HAUL INDICATOR)

The U-Haul Indicator

Diary, Newsletter

It is the end of the semester at the University of California, and as a single parent, the unenviable task of retrieving my daughters out of the dorms for the holidays fell to me.

When I arrived, I was stunned to find nothing less than a war zone. Both sides of every street were lined with mountains of trash, the unwanted flotsam and jetsam cast aside by departing students.

Computer desk, embarrassingly stained mattresses, broken lava lamps, and an assortment of heavily worn Ikea furniture were there for the taking. Newly arriving students were sifting through the piles, looking for that reusable gem.

Diminutive Chinese teenagers were seen pushing massive suitcases on wheels down the sidewalk on their way back to Shanghai, Beijing, and Hong Kong. The university attempted to bring order to the chaos by strategically placing dumpsters on every block, but they were rapidly filled to overflowing.

It was all worth it because of the insight it gave me into one of my favorite, least-known leading economic indicators. When I picked up the truck at U-HAUL, the lot was absolutely packed with returned vehicles, and there were more parked on both sides of the streets.

The booking agent told me there is a massive influx of people moving into California from the Midwest and the Northwest, with the result that lots all over the San Francisco Bay Area are filled to capacity.

I love this company because, in addition to providing a great service, they get the first indication of any changes to the migratory habits of Americans. The last time I saw this happen was after the dotcom bust when thousands of tech-savvy, newly unemployed pulled up stakes in the foggy city and moved to Lake Tahoe to work in “the cloud.”

Bottom line: California is enjoying a resurgence of hiring and new economic growth, most likely driven by Artificial Intelligence. This is what the stock market is screaming at us right now.

Want a Great Deal on a Used Lava Lamp?

AI: The New Detective on the Block - How Artificial Intelligence is Cracking Unsolved Crimes

Mad Hedge AI

For decades, unsolved crimes have cast long shadows, leaving families and communities grappling with unanswered questions and a lingering sense of injustice. But a new era of crime-solving is dawning, one where artificial intelligence (AI) is stepping in to assist investigators in cracking cold cases that have baffled detectives for years.

From analyzing vast troves of data to identifying patterns invisible to the human eye, AI is proving to be a game-changer in the pursuit of justice. This technology is not just a futuristic fantasy; it's being deployed right now, helping to bring closure to victims' families and hold perpetrators accountable.

The AI Detective's Toolkit

AI's role in crime-solving is multifaceted, with algorithms and machine learning models being utilized in a variety of ways:

Facial Recognition: AI-powered facial recognition systems can analyze images and videos from crime scenes, comparing them to vast databases of faces to identify potential suspects. This technology has already been instrumental in solving cases where the only evidence was a grainy photograph or a fleeting glimpse of the perpetrator.
DNA Analysis: Traditional DNA analysis can be time-consuming and complex. AI algorithms can expedite this process, quickly identifying matches and predicting potential familial relationships, leading to breakthroughs in cases where DNA evidence is limited or degraded.
Predictive Policing: By analyzing crime data, AI can identify patterns and predict where future crimes are likely to occur. This allows law enforcement to allocate resources more effectively and potentially prevent crimes before they happen. While this application of AI raises ethical concerns about bias and profiling, its proponents argue that it can be a valuable tool for proactive policing.
Natural Language Processing (NLP): NLP algorithms can analyze vast quantities of text data, such as police reports, witness statements, and social media posts, to identify connections and extract crucial information that might have been overlooked by human investigators.
Pattern Identification: AI excels at identifying patterns and anomalies that humans might miss. By analyzing crime scene data, phone records, and other digital footprints, AI can uncover hidden connections and generate new leads.

Real-World Success Stories

The impact of AI in solving unsolved crimes is not just theoretical; it's already making a tangible difference:

The Case of the Golden State Killer: One of the most notorious cold cases in American history, the Golden State Killer case, was finally cracked in 2018 with the help of AI. Investigators used a genealogy website to compare DNA from crime scenes to publicly available genetic data, ultimately leading them to Joseph James DeAngelo, a former police officer who was convicted of 13 murders and dozens of rapes.
Identifying Child Predators: AI is being used to analyze online activity and identify individuals who are sharing or seeking child sexual abuse material. This technology can detect patterns of behavior and language that indicate predatory intent, helping law enforcement apprehend offenders and protect vulnerable children.
Cold Case Units: Law enforcement agencies across the country are establishing dedicated cold case units that utilize AI tools to re-examine old evidence and generate new leads. These units are bringing closure to families who have waited years for answers and ensuring that justice is served, no matter how much time has passed.

The Ethical Considerations

While the potential benefits of AI in crime-solving are undeniable, it's crucial to address the ethical considerations surrounding its use:

Bias and Discrimination: AI algorithms are trained on data, and if that data reflects existing biases, the algorithms can perpetuate those biases in their predictions and analyses. This can lead to unfair targeting of certain groups, particularly minorities who are already disproportionately represented in the criminal justice system.
Privacy Concerns: The use of facial recognition and other AI-powered surveillance technologies raises serious concerns about privacy and civil liberties. Striking the right balance between public safety and individual rights is a complex challenge that requires careful consideration.
Transparency and Accountability: It's important for AI algorithms used in crime-solving to be transparent and explainable. This allows investigators to understand how the AI arrived at its conclusions and ensures that the technology is not being used in a biased or discriminatory manner.

The Future of AI in Law Enforcement

The use of AI in law enforcement is still in its early stages, but its potential is vast. As technology continues to evolve, we can expect to see even more innovative applications of AI in the fight against crime:

Crime Scene Reconstruction: AI could be used to create virtual crime scenes, allowing investigators to explore different scenarios and test hypotheses in a safe and controlled environment.
Enhanced Interrogation Techniques: AI could analyze micro-expressions and other nonverbal cues during interrogations, helping investigators detect deception and extract more accurate information.
Personalized Risk Assessments: AI could be used to assess the risk of recidivism for individuals who have been convicted of crimes, helping to inform sentencing decisions and rehabilitation programs.

Conclusion

AI is transforming the landscape of crime-solving, offering new tools and capabilities that were once unimaginable. While it's essential to address the ethical concerns and ensure responsible use, the potential of AI to bring justice and closure to victims and their families is undeniable. As technology continues to advance, we can expect AI to play an even greater role in the pursuit of justice, ensuring that no crime goes unsolved and no perpetrator escapes accountability.