Moderna Has Some “Splaining” to Do

Lots to cover, but I will try to brief.

Monday’s huge rally saw 90% of the volume going into stocks that were up on the day. That reversed the previous 90% down day last week and is another bullish sign for the intermediate-term. Interestingly, the most beaten down sectors led the rally. In other words, the “have nots” were all the rage. I am skeptical. Until proven otherwise, except for energy, my view is that big rallies in those sectors are selling opportunities.

Also on Monday, biotech company, Moderna, reported very positive phase I results in their clinical trial for a COVID19 vaccine. The stock has been red hot all year, soaring from $20 to $87. FYI, the company is a public infant, having only gone public in late 2018. My sense is that Moderna is run by scientists and not business people.

Why would I say such a thing about a company that could possibly cure COVID?

“Curiously” or “interestingly”, Moderna sold $1.34 billion of new stock in a secondary offering the exact same day the positive scientific news was announced. Hmmmmm. I am not accusing the company of manipulating the stock nor anything else nefarious, however, this whole thing just doesn’t pass the smell test. As Ricky Ricardo of I Love Lucy fame used to say, “they have some splaining to do”!

I was shocked that the financial media did not make this into a big story on Tuesday. If this was Tesla and Elon Musk, it would be “BREAKING NEWS” with a parade of analysts and lawyers weighing in.

Moderna may be different. Is the media giving them a pass because they are possibly “saving the human race” as I heard one person opine? It will be interesting to see if the SEC gets involved.

To matters even more interesting, on Tuesday afternoon STAT News released a report questioning the success of Moderna’s vaccine. That sent the stock lower and the stock market with it. Crazy times. When the crisis passes, there will be lots of people and companies with an awful lot of explaining to do.

Finally, as stocks lost all of their intra-day gains and then some on Tuesday, leaving a nasty looking print on the chart, this will be at least the 7th time we have seen this behavior since the March 23rd bottom. Only once has it led to what has been expected, further selling. With pre-market action indicating a 1%+ gain, the bears will have much work to do if they are going to see any follow through.

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