Earlier in the week we posted a commentary regarding the TED Spread’s return to pre-recession levels. Since this is largely an indication of how frozen or unfrozen the credit market is, the reason it’s of interest is clear. More importantly though, the sub-1.0 level the TED Spread seems to have become comfortable with during the last month (below 100 basis points) does indeed suggest that borrowers can actually get loans again, pretty much the same way they could before or during mid-2007. Good news, right?

There’s another indication, however, that tells us lending isn’t as completely healthy as it was before and during the middle part of 2007 (before everything fell apart).

It’s called the LIBOR-OIS Spread, and it’s still a little too high.

We’ve explained how the LIBOR-OIS Spread is a credit indicator before, so we won’t belabor it again. If you want the Full Monty though, here’s the original description.

If you don’t want the grueling details, the LIBOR-OIS Spread is simply the difference between the London InterBank Offered Rate and the Overnight Index Swap rate (or the interest rate charged for short-term interbank loans all banks need from time to time). As such, LIBOR-OIS spread is the perceived - though generally accurate - availability of funds available for short-term loans. The lower, the better the liquidity.
Anyway, the LIBOR-OIS Spread ’should’ be at or under 0.15% (15 basis points), like it was until July of 2007. However, it’s currently at 0.38% (38 basis points). Take a look, then keep reading.

Is that so high that it will continue to be a crimp on lending? In the opinion of this analyst, no, 38 basis points is a tolerable LIBOR-OIS Spread. It’s sure a lot more friendly than the 0.7% readings we saw for most of 2008, and it’s definitely a lot easier than the 3.8% peak we saw in October of last year. In other words, lenders and underwriters can work with it.

It’s certainly not a return to the glory days of ending though…. not like 2007 and earlier, when the only requirement for getting a loan was a name and a pulse (and the pulse was optional in many cases).

In the short run, this will continue to keep the economic recovery from blasting off; the re-expansion effort may almost be imperceptible. This relatively LIBOR-OIS Spread will not prevent the recovery from happening though.

In the long run, it will mean healthier loans, and hopefully, a better-contained real estate market.

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Since we’ve been following this saga almost from its beginning, and since we heard today that existing home sales were up in May, we figured we’d round the somewhat-good news out with an updated chart of the TED spread.

The what? The Ted Spread… the basic barometer of how much credit is actually available in the lending market. If you want the full explanation, go here for our prior review of what the TED Spread is. If you’re more of a ‘cut to the chase’ kind of person, here’s the gist - the lower the spread, the more lending that can possibly occur.

Ideally, the spread is less than 100 basis points; in ‘really good’ times, it’s closer to 50 basis points (as it was between 2003 and 2006).

Well folks, charts don’t lie. The current TED Spread is 42.74. Take a look (but keep reading).

Now, you don’t need us to tell you the current spread of 42 basis points isn’t the same as the 42 point spread around 2004 and 2005. Oh, the numbers are the same, but the effect sure isn’t.
That’s not a function of limited access to lendable funds though, and it’s really not even an indication of the ability to lend or borrow.

No, we view the current stifle mostly as an indication of borrower hesitation, and a few layers of new regulation. The spigots are unthawed though… the borrowers will come around sooner than later, because they CAN get financing. It’s not all going to happen by July, however. (When unemployment starts to sink, real estate lending could start to swell. It could start the return trip before that though.)

Now, as for existing home sales, the good news is they were up 2.4% in May, which follows a similar increase in April’s numbers. The bad news is, the average selling price per home was 16.8% lower than it was a year ago. Even that, however, is an improvement…. the figure was approaching 20% during the first quarter.

The media worked hard to put a negative spin on the data, and it’s not like it was the ideal scenario in our view either. It’s something though; it’s the kind of news that can certainly light a fire under the sidelined, would-be buyers we were talking about with the TED Spread discussion.

Frankly, anyone mulling over a home purchase should be less worried about stepping into a declining real estate market, and more worried about the Federal Reserve’s legitimate discussions about raising interest rates. They didn’t do it today, and probably won’t do it next month either. But, Bernanke & Co. appear to be a little more pro-active than the prior regime, and they know leaving rates this low for too long is like playing with fire. It’s still a tad too soon for them to be hawkish yet though.

By the way, there is little to no anecdotal evidence that rising rates actually harm equity prices. Quite the contrary actually - rising rates frequently accompany rising stocks despite the assumptions otherwise. We’ll host that discussion another time though.

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It’s only been a couple of days since we highlighted this penny stock, but the chart is shaping up so perfectly, we thought it would be useful to update our coverage of BRT Realty Trust (BRT)…. and talk about some things we didn’t talk about then.

Just to be clear, the curling “U” shape is still the key to our attraction. Those slow reversals are able to take enough time to find a firm footing, making the upturn more apt to last. And, since our last look, BRT has continued to make higher highs on higher volume.

What we didn’t get to mention last time was how these curls can be highlighted by a MACD indicator. The nearby chart and its MACD lines are almost a perfect illustration of what you may want to look for as well….a gradual reversal, particularly one made on rising volume (which we see here, with those rising blue volume bars).

Is it perfect? No - nothing is. You can look not that far back on the chart and see several MACD fakeouts. Then again, we don’t use MACD lines by themselves. They’re one of several tools we look at; all of them have to come together at the right time in the right way to get the right ’set up’. BRT just happened to do that a few days ago.

As for the other tools we consider, stick around - we’ll discuss them eventually.

Some of you also inquired about a target. As with the MACD indicator, we think about several big factors to that end. One of those considerations is the chart’s history. The other is our time frame.

In this particular case, since our initial attraction to the chart was only based on the last couple of months and what’s happened to this penny stock since the May plunge. Since the ’set up’ only took a couple of months to materialize, we’re only thinking about a holding period of a couple of months, and only a target price around the high where the clock started…. around May’s high of $5.72. (Prior peaks almost always make smart targets.)

If you’re into longer holding periods (which is fine), you may want to perform the same kind of analysis using weekly charts instead of daily charts. In those long-term cases, know it may take weeks for a chart to make that evident U-shaped curl. However, the uptrend could last for months if you pick ‘em right.

We don’t see a ton of bullish momentum building on the weekly chart just yet, and may not for months. However, considering this stock was once trading at $30 and is now at $5, it may be worth watching for a while.

Remember, the slower and smoother the recovery move, the more reliable the follow through is most of the time.

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Here’s a list of Tuesday’s penny stocks that traded on unusually high volume. Some of them did so with little to no explanation. Since clearly ’somebody knows something’ though, these penny stock tickers are probably worth exploring a little further, as they may be great trading candidates - volume often precedes big moves.

Oh, and just to clarify our use of the word suspicious when we write this column, it’s not necessarily a connotation of impropriety or bearishness…. it’s just meant to be a subtle hint of interesting activity.

Cellynx Group Inc. (CYNX)

Yesterday wasn’t the only day we’ve seen huge volume in Cellynx shares, but it’s the first time we’ve seen it like this since late May. The stock’s been rising the whole time though.

CYNX is an interesting bird…. lots of news (it seems), but not a lot of substance in terms of performance and results.

Technically speaking, the high volume gain from Tuesday almost looks like a blowoff top, as it occurred well after an uptrend had been in place. In that regard, CYNX may be a better short candidate - the high volume day could just be a pivot. Better to find out what’s going on first though.

Raptor Pharmaceuticals Corp. (RPTP)

We’ve actually seen a strong volume increase over the last five days for Raptor, all of it bullish.

From a short-term view it looks like this penny stock’s over-extended. Longer term though (two years or more) we can see the recent rally from 17 cents to 40 cents still doesn’t even come close to putting these shares back where they were. Could the recent volume increase be the beginning of a recovery move?

The company’s certainly got more going on now than they did before April….two drug-related patents were approved, they began Phase IIb testing of Cysteamine, and have started to collaborate with Roche to develop a drug delivery that crosses the blood/brain barrier.

EnDevCo Inc. (EDVC)

We actually put EnDevCo on our watchlist about a month ago, based on the stock’s rise on high volume in late May. The rally - and the volume - petered out though, so we lost interest….until yesterday. In one shot, EDVC shares are back up towards recent highs, and they got there on the highest volume we’ve seen since February.

So what gives? That’s the odd part - no news at all. Not even a rumor. Someone’s buying though (obviously).

We’re not sure those coat-tails are ready to be ridden yet, but it’s worth keeping an eye on.

OMNOVA Solutions Inc. (OMN)

It wasn’t so much the volume yesterday, but rather the strong move that seemingly came on dwindling volume… quite a surprise.

Yesterday’s buyers did the bulls a favor though. Resistance had been forming between $2.75 and $2.83. Higher lows coupled with mostly-flat resistance mean the formation of a pennant shape, which was broken - bullishly - with the move to $3.05.

The jury’s still out on whether or not the breakout will take flight, but it’s a decent start.

Information and possibilities are great, but if you want specific, actionable trading ideas from the micro cap and penny stock world, then you want to sign up from our free newsletter. Maybe one of the stocks we looked at today will become an official Micro Capo press trade tomorrow.

It was a big weekend for cancer vaccines, if you can read between the lines written of and by the American Cancer Society and the National Cancer Institute. The Associated Press was present at a cancer conference held on Sunday (May 30th), and followed up with a nice story about four big-time success stories with cancer vaccines. The four were…

• Lymphoma
• Prostate
• Melanoma
• Neuroblastoma

The types of cancer themselves aren’t the encouraging part for us as investors. Rather, it was the buzz the immune therapy work-to-date was creating a buzz among the medical community…. among the doctor’s and researchers who are more interested in quality healthcare than they are about monetizing the medicine. Their opinion holds a lot more meaning than, say a company’s (biased) opinion about its own R&D.

In other words, immune therapy and cancer vaccines are working their way into world of mainstream medicine.

What the article didn’t do was actually list the companies behind the four success stories. That’s fine - the AP isn’t a shill for publicly-traded stocks. We aren’t either, but we’re at least curious about who got all these MD’s excited. So….

We ferreted out the corporations who presented the encouraging data at the conference.

In no particular order:

• Lymphoma: Biovest International Inc. (BVTI), and it’s partial parent company Accentia Bipharmaceuticals Inc. (ABPIQ) figured out a way to move the median disease-free survival rate 30.66 months to 44.2 months (a 47% increase) with their BiovaxID drug.
• Prostate: Generex Biotechnology Corp. (GNBT) demonstrated that their vaccine is “safe, well tolerated and produces the desired immunological response in patients.”
• Melanoma: Actually, this one’s not being developed by a drug/pharma company. Patrick Hwu, MD, head of melanoma medical oncology at the University of Texas M.D. Anderson Cancer Center in Houston is heading up this work.
• Neuroblastoma: This one’s also being developed privately (by a school), so there’s no direct investment opportunity… unless someone buys the technology and research and any associated patents.

The Companies They Didn’t Tell You About

While the event featured four specific companies or organizations in the field of immune therapy, investors actually have a handful of other ways to invest in the relatively-new arena.

The first one is Dendreon Corp. (DNDN)……yes, the Dendreon.

The biotech company is probably further along the R&D path than any other cancer vaccine developer. Its prostate cancer treatment Provenge is shown to be relatively effective, though not by much - the drug extends the patient’s life by an average of four months.  In fact, Dendreon’s rug was pulled out from underneath the company in the prostate cancer race recently when OncoGenex Pharmaceticals (OGXI) posted better prostate cancer treatment efficacy with their treatment.

Just goes to show that hype and stature can get you further within the investment community than results can…. most investors still haven’t heard of OncoGenex.

The last word was that OncoGenex was looking for a funder or investor to finance Phase III for their drug. Dendreon won’t have the same financial challenges, just like GlaxoSmithKline (GSK) didn’t. Glaxo HPV vaccine MAGE-3 is currently in phase III trials. The Glaxo drug - if approved - will go toe to toe with Merck’s (MRK) Gardisil.

Another off-the-radar stock in the field of cancer vaccines is CEL-SCI Corp. (CVM). The company’s head and neck cancer drug Multikine is also ready to enter Phase III testing; the company is planning it now. Multikine has shown tremendous promise in treating other cancers too, and Phase II results were absolutely stellar.

Even further down the totem pole is ImmunoCellular Therapeutics, Ltd. (IMUC). The company’s got nothing even into Phase III studies yet, so don’t look for fireworks tomorrow…. or even next year. It’s a name you’re apt to hear again though.

There are others too, and they aren’t too hard to find if you can get past all the mega-pharma companies. Here’s a little hint though - don’t just think about companies in the United States. There are more cancer vaccines being develoepd outside of the U.S. than within, and the market is global too.

We’re going to follow up in great detail going forward on the subject; the industry is very ‘real’ now. If you’d like our ongoing analysis and unbiased updates about which companies are contenders and which are pretenders, subscribe to our free newsletter today.