Answers - Finance

A multi-year level is a strong level. SPX is making its third attempt to hold multi-year resistance in the low 1,250s. However, the next few weeks may be volatile, because of the FOMC annou

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

ncement Tuesday, earnings warning season in late September, end-of-the-quarter "window dressing," new money at beginning of quarter, and earnings reports in October.

The SPX daily and mont

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

hly charts below show major resistance between the mid 1,240s and mid 1,250s, i.e. the two previous four-year highs at 1,246 and 1,243, the 61.8% Fibonacci level (or 38.2% retracement) from

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

the 2000 peak to the 2002 trough at 1,253, and the monthly upper Bollinger Band at 1,251.

There's more uncertainty about the FOMC meeting Tuesday than other recent meetings, because of hu

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

rricane Katrina's impact on the economy. It's uncertain if the FOMC will pause, until new economic data reveal the effects of hurricane Katrina, or if it will continue to tighten at a "meas

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

red" pace (of small increments).

NYSE volume has been heavy recently, which is typically bullish. Volume was particularly heavy on Friday, because of end-of-the-quarter expiration of futur

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

es and options (quadruple-witching). The heavy volume, on the NYSE, suggests SPX may rise into the 1,250s within a few weeks.

Nonetheless, longer-term, there are strong bearish indicators.

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

The SPX to U.S. Dollar ratio is near an all-time high, which suggests SPX will fall and the dollar will rise (since there's an inverse relationship). Moreover, the Utility and Transport In

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

dices to VIX ratios had parabolic rises over the past two years, and they're currently back to near their all-time highs. Furthermore, large cap to small cap ratios are near all-time lows i

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

ndicating large institutions are not convinced that the cyclical bull market will continue.

The U.S. economy is slowing after 2 1/2 years of above trend (and unsustainable) growth. U.S. re

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

l growth will slow from 4% in 2004 to about 3 1/2% in 2005. I suspect, the U.S. economic expansion will slow further to below 3% in 2006. However, there's a negative correlation between emp

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

loyment and earnings. Hurricane Katrina slowed employment growth. So, it seems, the market is betting earnings growth will pick-up, at least short-term.

Oil prices fell from about $71 a ba

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

rrel three weeks ago to just over $63 Friday. However, OIH (a basket of oil stocks) fell from about $122 a share three weeks ago to only $119.50 Friday. Gasoline prices fell greater than he

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

ating oil prices. Energy stocks are about 15% of SPX's market capitalization, which is one reason why SPX remains high.

It's uncertain how next week will play-out. However, if SPX rises in

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

to the low 1,240s Monday morning, it may pullback to the mid 1,230s, and then rise into the low 1,240s again before the FOMC announcement Tuesday afternoon. If SPX falls Monday morning, to

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

he low 1,230s, it may rise into Tuesday. However, it's uncertain how much the unwinding of options Friday skewed direction.

If the FOMC pauses, that may initially be bullish, and then bear

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ish, because large institutions will be skeptical. If the FOMC tightens, that may initially be bearish, and then somewhat bullish, although the market will enter earnings warning season (pr

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

eannouncements) next week. Normally, the true market trend takes place within two or three days after an FOMC announcement.

The market dislikes uncertainty. So, Monday may be particularly

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

volatile. However, I expect most of next week to be volatile. There may be opportunities to make gains with OEX calls and SPX puts early next week. However, later in the week, it may be bes

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

t to focus on a few top individual stocks, e.g. long-term buys.

Charts available at PeakTrader.com Forum Index Market Overview section

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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