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Archive for December, 1969

Sabrient Risers –

Top 5 Risers

Stock Rating Analysis
AMR The projected value for AMR is still rising quickly even though past earnings have already improved significantly.
AA The projected value for Alcoa is still rising quickly even though past earnings have already improved significantly.
AUO The recent earnings history for AU Optronics shows singnificant improvement while projected valuation continues to rise.
AFL The long term projected growth rate for AFLAC is rising, and this is happenening at a time when historical earnings have already increased significantly.
ARO Aeropostale has shown a remarkable increase in projected value recently, with the majority of analysts expecting higher than previously expected earnings.




Whither Rates?

Courtesy of Doug Short.

It is that time of the year again: that brief moment when we confess that 2012 is the year for those overdue changes we now vow to see through. Not surprisingly, the resolutions we make annually are pretty consistent from person-to-person. Shed those ten pounds, save by forgoing the daily latte, spend more time with family or quit gripping and seek a better job — all will recognize these ambitions since we all share the same foibles.

Now, judging from the text of the minutes for the December 13th meeting of the Federal Reserve Open Market Committee (FOMC), we believe Chairman Ben Bernanke’s resolution for 2012 is to perhaps make the future direction of monetary policy a little less opaque. As an oracle (of sorts), the FOMC’s pronouncements are open to interpretation. The ancient Greeks could commiserate: in their mythology an oracle’s utterances are often misconstrued, often to the misfortune of those seeking its guidance.



Perhaps with this in mind, the FOMC proposes to make its intentions a bit clearer for us mere mortals. Commencing this month, the Federal Reserve plans to incorporate forecasts for the targeted federal funds rate in its Summary of Economic Projections (SEP), which is published four times a year with the FOMC minutes. (For those who have forgotten, the fed funds rate this is the interest rate banks charge each other when they trade excess reserve balances held at the Fed. The rate is set periodically by the FOMC and is a key lever used by the central bank in implementing monetary policy.)

The SEP already includes Fed forecasts for three key economic variables (real gross domestic product growth, the unemployment rate and changes in consumer prices) which guide the FOMC’s deliberations. Projections are made for the current calendar year and the next three thereafter. The Fed’s latest projections were released on November 22nd in conjunction with the minutes for the November 1st FOMC meeting.

In its latest assessment, committee members see the economy expanding at 2.3 to 3.5% in 2012 (versus a range of 2.2 to 4.0% in its June forecast), with unemployment between 8.1 to 8.9% (versus 7.5 to 8.7% in June) and consumer prices advancing by 1.4 to 2.8% (versus 1.2 to 2.8% as of June). The picture painted is hardly one of an economy…
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A Portfolio-Construction Tip from the TIP ETF?

Courtesy of Doug Short.

A New Year has started, yet many of last year’s financial debates remain the same.

Will Inflation or Deflation be the major theme in 2012? Will the Currency winner will be a stronger Dollar or Euro as a rising wedge has formed (see post here)? Will Global falling resistance hold or break? (see post here) Flag/Pennant patterns in the broad stock market will be resolved to which side? Is TLT facing resistance at the 2008 financial crisis highs (see post here)? Can TLT rally in 2012 like it did in 2011, up over 25%?

A “Helpful Tip” could well come from the TIP ETF as it has formed an Ascending Triangle over the past 5 months.

 

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Tips can be affected by rising and falling interest rates and inflation/deflation. This pattern could still take a few weeks to resolve, yet how TIPS break from this pattern could well become a HUGE TIP for portfolio construction!

 

(c) Kimble Charting Solutions
blog.kimblechartingsolutions.com

 

 

 

 





Graphical Representations of the Fed’s Effort to Stimulate Bank Lending

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


Bernanke is trying every way he can to get banks to lend (printing coupled with a multitude of lending facilities and Fed programs).

It’s easy enough to prove the printing: Base money supply is up about $1.8 trillion since the start of the recession.

The charts below offer a stunning narrative of the Fed’s efforts and the results to date.


Base Money Supply

Money Multiplier Theory

The Money Multiplier Theory (an incorrect theory) suggests this money would be lent out 10 times over causing rampant price-inflation and GDP growth.

Alternate (Correct) Bank Lending Theory

  1. Banks do not lend simply because they have the money.
  2. Banks lend as long as they have credit-worthy customers provided the banks are not capital impaired.
  3. Reserves are not an issue. Lending comes first, reserves follow if needed.

With some charts below created by my friend “BC” let’s take a look at Bernanke’s efforts to stimulate lending.

Bank Loans Divided by Base Money Supply

Annualized Percent Change in Bank Loans Divided by Base Money Supply

Loans to GDP

Loans to GDP Annualized Percent Change

Loans to Private GDP

Loans to Private GDP Annualized Percent Change

M2 Multiplier: M2 Money Supply Divided by Base Money

M2 Velocity: GDP Divided by M2

The above charts show that it is taking more and more money just to keep the economy afloat.

US deficit spending is $1.4 trillion dollars, Bernanke is flooding banks with cash, interest rates are at record lows, mortgage rates are at record lows, and velocity of money is falling like a rock.

Excess Reserves

Of the $1.8 trillion Bernanke has added to base money supply since the start of the recession, nearly all of it is sitting parked at the Fed as excess reserves.

Interest Paid on Excess Reserves

As you can see, banks have parked close to $1.6 trillion with the Fed earning .25 percent annually. This is free money…
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Cycles in Dow Market History: Where Are We Now?

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.


Following on from my overall summary chart of 110 years of the Dow Jones Industrial Average (DJIA) published here last week, further detailed analysis serves to demonstrate that volatility has been reliably consistent for the past 110 years, and now is no different. Leading on from last week’s DJIA summary, I discovered on the 10base LOG chart that there was an approximate 16.6 year bounding box with 43% depth that could be repeatedly applied throughout the entire DJIA price history ? stacked vertically and added horizontally. I have since discovered this was no accident, and the chart below shows you how it was derived, in both time and price.

 

The completed annotated DJIA chart ? (using LOG based quartiles)

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Notations show alternating periods, highlighted volatility, and the amount of growth in quartile boxes (in blue). A similar chart can be done using a quintile LOG chart, but the repeating range is predominantly in quartiles.

After a bit of Photoshop pasting with an overlay of Doug Short’s Q Ratio analysis (sourced here), we get this interesting result.

 

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The chart above shows that the previous growth cycles have all commenced on a Q Ratio low, as it did in 1983, and would also be timed similarly for lows in other market value ratios such as cyclical P/E ratios, etc. It further confirms the current level of the Q Ratio, after the growth period into 2000, is yet to reach anywhere near the low levels of the three previous consolidation periods.

Where do I think we are now?

As of January 2000, we had just completed another ten-fold increase in the DJIA index, as a result of a clear up-leg with excess rate of growth that was almost 3% steeper that the growth out of the 1932 low. This…
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Real Final Sales Set to Decelerate?

Courtesy of Doug Short.

With the release of the Advance Estimate of Q4 2011 GDP less than two weeks away, the economists surveyed by the Wall Street Journal are forecasting accelerating growth for the US economy and generally discount the odds of a recession in the next 12 months (more here). With this optimism for context, let’s take a step back and look at some interesting correlations between components of GDP and the onset of recessions.

Recessions began in the past when Real Final Sales of Domestic Product (note) and Real Personal Consumption Expenditures (PCE) fell below 2.5% year-over-year and Real GDP overall fell below 2%. Why? Evidently 2.5% is the effective threshold below which consumption cannot sustain employment, labor force growth, and production replacement (capital and labor).

Note in the first chart below that Real Final Sales (the red line) have yet to accelerate above the historical recession threshold. And the final revision of Q3 2011 GDP (not shown) came in at 1.8%.

However, the 2.5% recession threshold in the past was maintained with the average real GDP trend of 3.3% (2.3% per capita), whereas the trend for real GDP has been cut in half since 2000 (and is below 1% on a per-capita basis) See this GDP chart for a look at the long-term GDP trend.

As the next chart illustrates, the YoY Real Disposable Income likewise bodes ill for the economy. It is at a level lower than its trough in six of the past eight recessions. Only once, during the Crash of 1987, has this metric fallen to the current level outside the bounds of a recession.

With Real Final Sales still effectively in historical recession territory, it is not inconceivable that a new lower threshold for YoY real growth has emerged for an “official” recession to be declared.

Might the new “new normal” threshold for an “official” recession be 1% or slower instead of 2.5%? Economists and politicians will be able to claim that the economy “continues to recover” at a slow, steady, “non-inflationary” rate, all the while the unemployment rate only falls because the long-term unemployed fall off the rolls and Boomers in accelerating numbers leave the full-time regular labor force en masse.


Note: Final sales of domestic product is GDP
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WSJ Economists’ GDP Forecasts: 3.1% in Q4, Falling to 2.2% in Q1 2012

Courtesy of Doug Short.

On Friday of next week (January 27th) we’ll get the Advance Estimate for Q4 GDP from the Bureau of Economic Analysis. Meanwhile, the Wall Street Journal’s January Survey of economists is now available. Let’s see what their crystal ball is telling them about Q4 GDP (download Excel File).

First, some context: The BEA’s Final Estimate for Q3 GDP came in at 1.8 percent, a downward revision from the 2.0 percent Second Estimate, which was a downward revision from the Preliminary Estimate of 2.5 percent.

With the successive downward revisions in Q3 GDP, have the economists become less optimistic in their forecasts for Q4? No indeed! In December the forecast median and mean for Q4 GDP was 2.9 and 2.8, respectively, with a mode (the most frequent forecast) of 3.0 (see the previous survey). In January the median and mean have risen to 3.2 and 3.1, respectively, and the mode is a stunning 3.5 percent. The latest mode is above the 3.3 average GDP since the inception of quarterly GDP reporting in the late 1940s and over double the 1.7 percent 10-year moving average of GDP (illustrated here).

What about Q1 2012 GDP? We see the same pattern as last month — a contraction in optimism. The median and mean drop to 2.1 and 2.2, reflectively, and the mode is 2.0, a big tumble from 3.5 for Q4 2011.

Thus far we’ve looked at the forecasts for quarterly GDP. What about the WSJ survey forecast for 2012 annual GDP? The most recent the Federal Reserve economic projections date from November 2nd, which are available here (click on the PDF attachment). The Fed’s range of estimates for 2012 was 2.3 to 3.5, with a “central tendency” of 2.5 to 2.9.

Now let’s have a look at what the WSJ economists think about the 2012 annual number.

So, with a 2.4 percent mean and 2.3 percent median, the economists are a bit less optimistic than the Fed about next year’s growth.

Odds of a Recession

The WSJ survey questionnaire again this month included a question about the probability, on a scale of 1 to 100, of…
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Weighing the Week Ahead: Have Big Companies Lost Their Earnings Mojo?

Courtesy of Doug Short.

Earnings season starts in earnest this week. There are a number of key questions:

  1. Have slowing economies in Europe introduced a big drag on profits?
  2. What about the dollar strength? Bad for profits?
  3. Profit margins have been at historic highs. Is the long-awaited mean reversion taking place?
  4. What about the outlook? Can there be any confidence about future profits in the face of so much uncertainty?

As I write this on Saturday, with a three-day weekend ahead, I know that the news from Greece will dominate on Tuesday. Whatever I write tonight could look silly, but I have been there before:)

By Thursday, we’ll all be talking earnings.

I will discuss how to play this in the conclusion. First, let us do our regular review of last week’s news.

Background on “Weighing the Week Ahead”

There are many good sources for a comprehensive weekly review. My mission is different. I single out what will be most important in the coming week. My theme for the week is what we will be watching on TV and reading in the mainstream media. It is a focus on what I think is important for my trading and client portfolios.

Unlike my other articles at “A Dash” I am not trying to develop a focused, logical argument with supporting data on a single theme. I am sharing conclusions. Sometimes these are topics that I have already written about, and others are on my agenda. I am trying to put the news in context.

Readers often disagree with my conclusions. Do not be bashful. Join in and comment about what we should expect in the days ahead. This weekly piece emphasizes my opinions about what is really important and how to put the news in context. I have had great success with my approach, but feel free to disagree. That is what makes a market!

Last Week’s Data

Last week saw an interesting change in tone. The news from Europe (at least until Friday) was better, while the US economic data was worse. The dollar strengthened, which for many months has been the signal for lower prices on commodities and stocks. With that in mind, stocks did pretty well.

The Good

  • 2012 Earnings. The best news of the week is something that you will not see mentioned


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The Nasdaq 100 Twelve Years After the Tech Bubble

Courtesy of Doug Short.

Post bubbles can be painful! The Nasdaq 100 (NDX) hit its all-time high back in 2000, yet 12 years later this key tech index has been unable to rally above its 38% Fibonacci retracement level.

For the past year the NDX has attempted to break this resistance, only to be held in check. Now the NDX is within 3% of the highest weekly closing price of the past year and back at Fibonacci resistance.

Can this index do something different this time around and break resistance? Stay tuned!


 

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(c) Kimble Charting Solutions
blog.kimblechartingsolutions.com

 

 

 

 





Demographic Headwinds: The Decline of Peak Spenders

Courtesy of Doug Short.

Demographer Harry Dent was recently a featured guest on Bloomberg TV in an interview that was promoted with the frightening tease “S&P 500 to Fall 30-50% in 2012.” The video clip is available at YouTube here.

The rationale for Dent’s grim forecast is primarily based on the demographics of the peak spending years, an age cohort he refers to in the interview as ages 46 to 50. If we use the Census bureau five-year data groupings, the cohort in question is Age 45-49 (which is the range Dent normally refers to in his publications).

A search on “demand curves” at Dent’s website produces a link to a fascinating PDF file illustrating the life-cycle buying habits of households by the age of the head of household for about 240 different product categories. If you spend a few minutes looking over these pages, you’ll quickly grasp the significance of demographics for spending patterns and why the 45-49 cohort earns the reputation of peak spenders.

Let’s study a graph of the Census Bureau historical and forecast data for the peak-spending cohort population in the US from 1980 to 2050.

The Age 45-49 cohort peaked in 2009 and will bottom out in 2022 after an estimated decline of 13.4% from the 2009 population. The Census Bureau’s estimate for 2012 would give us an additional 8.8% decline in numbers for the big spending cohort before bottoming out.

Economists and market analysts often think of retiring boomers as the primary drag on the economy with their the transition from the accumulation to the decumulation phase of their life-cycle. But if we understand of the crucial role of consumption for our economic health (about 70% of GDP), a significant decline in the number of peak spenders is a demographic headwind that will challenge us for years to come.

 

 

 

 

 

 





 
 
 

Zero Hedge

David Stockman On 'The QE Follies': Bernanke's Swell Gift To The Big Four Banks

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by David Stockman via Contra Corner blog,

I recently pointed out that the Fed’s 5-year campaign to drive the 30-year mortgage rate from 6.5% to 3.3% had accomplished nothing except to touch off another of those pointless “refi” booms which enable homeowners to swap an existing mortgage for a new one carrying a significantly lower interest rate and monthly service cost. Such debt churning exercises have been sponsored repeatedly by the Fed since the S&L debacle of the late 1980s.

I further noted that this time the Fed had re...



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Chart School

Weekly Market Summary

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

The set-up coming into this past week was clean: SPX and NDX exhibited breadth extremes from which they usually bounce and April Opex is a seasonally strong week (post).

In the event, SPX rose nearly 3%. In the process it exhibited a familiar pattern: overnight gaps in the past 4 days accounted 60% of the week's gain. Cash hours, when liquidity is greatest, was not where the meat of the gains took place. That was even more true for RUT and NDX which only posted cash hour gains during two of the four days.

After a sharp drop and a strong bounce, where does that leave the markets? Let's run through each of our market indicators...



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Insider Scoop

Nike Laying Off Fuel Band Team, According to CNET

Courtesy of Benzinga.

Nike (NYSE: NKE) is laying off 70-80 percent the engineers who created its FuelBand Fitness Tracker. according to a post that first surfaced on the social network Secret and was reported Saturday by CNET. Approximately 55 of the 70 employees on Nike's Digital Sport hardware team are reportedly being cut.

View full article http://www.cnet.com/news/nike-fires-fuelband-engineers-will-stop-making-wearable-hardware/

Posted-In: CNETNews Rumors

...

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Phil's Favorites

"Insatiable" Idiocy from the Economist on What to Do About Russia; Warmongers Can't Think

Courtesy of Mish.

In "Insatiable" the Economist says "The cost of stopping the Russian bear now is high—but it will only get higher if the West does nothing".

Economist: Mr Putin has used the Ukrainian crisis to establish some dangerous precedents. He has claimed a duty to intervene to protect Russian-speakers wherever they are. He has staged a referendum and annexation, in defiance of Ukrainian law. And he has abrogated a commitment to respect Ukraine’s borders, which Russia signed in 1994 when Ukraine gave up nuclear weapons. Throughout, Mr Putin has shown that truth and the law are whatever happens to suit him at the time.

Mish: What a bunch of one-sided hypocritical nonsense. The ...



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Market Shadows

Canary In the Yen Shaft: $10 trillion JGBs; No Bids!

Two guest authors, David Stockman and long-time contributor John Rubino, write about the current state of Abenomics. 

Canary In the Yen Shaft: $10 trillion JGBs; No Bids!

By  

This one matters a lot. Abenomics was predicated on a lunatic notion—namely, that the economic ills from Japan’s massive debt overhang could be cured by a central bank bond buying spree that was designed to be nearly 3X larger relative to its GDP than that of the Fed. Yet anyone with a modicum of common sense and market...



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Option Review

Wild Ride For Chipotle

Shares in Chipotle Mexican Grill Inc. (Ticker: CMG) opened higher on Thursday morning, rising more than 6.0% to $589.00, after the restaurant operator reported better than expected first-quarter sales ahead of the opening bell. But, the stock began to falter just before lunchtime on concerns the burrito-maker will increase menu prices for the first time in three years. The price of Chipotle’s shares have since fallen into negative territory and currently trade down 3.5% on the session at $532.89 as of 1:50 p.m. ET.

Chart – Shares in Chipotle cool by lunchtime

...

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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Sabrient

What the Market Wants: Positive News and Stocks at Bargain Prices

Courtesy of David Brown, Sabrient Systems and Gradient Analytics

Last week’s market performance was nasty again, especially for the Small-cap Growth style/cap, down 4%.  Large-caps faired the best, losing only 2.7%.  That’s ugly and today’s market seemed likely to be uglier today with escalating tensions over the weekend in Ukraine. 

But once again, positive economic trumped the beating of the war drums. Retail Sales jumped up 1.1% over a projected 0.8% and last month’s tepid 0.3%, which was revised up to 0.7%.  While autos led, sales were up solidly overall.  Business inventories were about as expected with a positive tone.  Citigroup (C) handily beat estimates to add to the morning’s surprises.  As a result, the market was positive through most of the day, led by the DJI, up 0.91%, and the S&P 500, up 0.82%.  NASDAQ had a less...



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Digital Currencies

Facebook Takes Life Seriously and Moves To Create Its Own Virtual Currency, Increases UltraCoin Valuation Significantly

Courtesy of ZeroHedge. View original post here.

Submitted by Reggie Middleton.

The Financial Times reports:

[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process. 

The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...



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OpTrader

Swing trading portfolio - week of April 14th 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here is the new Stock World Weekly. Please sign in with your user name and password, or sign up for a free trial to Stock World Weekly. Click here. 

Chart by Paul Price.

...

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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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Pharmboy

Here We Go Again - Pharma & Biotechs 2014

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.

And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference.  Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014?  The Biotech ETF beat the S&P by better than 3 points.

As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...



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FeedTheBull - Top Stock market and Finance Sites



About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>