Dow Jones 10919.62 +28.90 12:02 pm PST, November 29, 2005  NASDAQ 2238.19 -1.18 For info, visit access.smallcapnetwork.com S & P 500 1261.02 +3.56 Change your subscription status here Russell 2000 673.94 +2.44 VOLUME 05: ISSUE 89  Feature: Novelos/FDA Meet Friday. DOW 11,000? As we mentioned on November 8th, biotech Novelos (OTCBB: NVLT) meets with the FDA on December 2nd to discuss its impressive Phase 1/2 results for its NOV-002 treatment for non-small call lung cancer (NSCLC). The company's intention is to get the green light to structure a Phase 3 study under a Special Protocol Assessment (SPA) to begin by Q3 2006. Simply put, an SPA is a set of strict Phase 3 study parameters agreed upon by the filing company and the FDA. Once the company satisfactorily meets the endpoint and guidelines of the contract, the FDA will approve the drug. Company management continues its program of institutional meetings to bring its story to both large North American and European investors. Investors and the market seem to like the company's potential as the shares have been moving up nicely on rising volumes on what could be anticipation of a positive outcome from the FDA meeting. With potential positive news on the horizon, a technical look at the shares would no doubt be useful: It appears something is up with NVLT as the sellers and any shorts apparently didn't expect this recent up move. The shares appeared to want to drop to $2.75 and possibly consolidate in the $2.25-$2.50 range. Instead, they just started moving up and this recent rise appears to be a complete directional reversal for the shares. As we have mentioned previously, the next resistance level is $3.75 and a breach of that level would be very positive. Given the up and down trading volumes, the potential for short-term volatility remains.  If successful with establishing a Phase 3 SPA study for NOV-002--as well as other significant developments recently announced-- we feel that Novelos will quickly move into a whole new realm of growth. Courtesy of previous Russian studies and experience, we know that the compounds work; that they are extremely cost-effective to produce and could well make a significant difference in the lives of patients as a treatment for NSCLC. And eventually other forms of chemotherapy-resistant forms of cancer such as ovarian. In our opinion, the potential for Novelos remains extremely compelling. As it enters this new phase, accumulation of the shares at these levels and on any dips becomes an even better risk/reward situation.     DOW 11,000. Who cares? Apparently only CNBC and the media. Amusing to watch the talking heads continuously ask grizzled floor traders and portfolio managers about DOW 11,000. Virtually all dismiss it as an artificial milestone. Bloodied but unbowed, CNBC forges ahead, trying to make a story out of this non-story. We thought it would be useful to give readers our take, even though the DOW is narrow and relatively unreflective of overall market activity. It is the one most of the media glom onto, so far be it from us not to have an opinion. This monthly chart gives investors a look at the big picture. 11,000 is a given, in our opinion, which once breached will bring in some volatility. In 1996,the Dow made a decent move, but couldn't crack 12,000. Over the last few years it has sold off and cleaned a lot of people out to the .618 retracement level. A rally then ensued and, in our opinion, appears headed higher; possibly to the 11,760 level.  Once the old high is broken, there will likely be a significant sell-off. So the strategy would be to take profits on new highs and wait for a big pullback. We'll comment along the way mainly due to the fact that the media will keep the DOW in the limelight, even though it has marginal influence in the market as a whole--especially the smallcap market. Given the lackluster performance of smallcaps this fall--most investors seem more interested in big caps presently--tax selling could yield some decent opportunities as it picks up in December. We believe that process has already started and is reflected in weaker prices for the smaller and more formative companies. At this time of year, investors tend to look for the January Effect, which is the tax-loss selling of stocks in December and then the repurchase in January to replace positions. The supposition is that this activity will yield significantly higher prices in January as investors rush in. From 1950-2002, the month of January has been up 33 times and down 20 with an average monthly return of 1.37 percent--hardly definitive or even mildly impressive. Statistically, the month of December has actually been the better bet over the same period with 40 up years and 13 down years with an average monthly return of 1.55 percent. Go figure. The worst month, by the way, has been September at 21 up years, 32 down with less than a 1 percent average return. Now you know. In the case of small stocks, since 1994, the January effect return has been either minimal or negative. The reason is simple. The January effect used to be valid because it wasn't widely known. Now, courtesy of every pundit that needs to fill bandwidth or pages, it is still pumped as a can't-miss strategy. Now, if it occurs, it is more of a self-fulfilling prophecy instead of urban legend. Like most things in the market, once everyone knows about something, it's way too late. The bottomline? Buy good stocks at good prices. And don't worry about the month. Except maybe September.   We Value Your Feedback Got comments, questions or suggestions? 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