Archive for 2007

Are We Heading for an Economic Tornado?

 "I'M MELTING! MELTING! OH, WHAT A WORLD, WHAT A WORLD…"The Wicked Witch of the West

All it took at the end of the story to vanquish the all-powerful witch was a splash of cold water in the face.  Interestingly, there is speculation that the original book was a political parable and that the witch represented the evil Standard Oil corporation (now Exxon) who, in 1900 when the book was written, were aligned with the Wall Street crooks of the time and the railroads to force landowners off their property by using the "humbug" of the gold (troy Oz) – backed dollar (emerald) standard to control the money supply in order to force farmers off their land and drive their competitors out of business.

The election of 1896 was all about a contest between "goldbugs" and "silverites" (In the book, Dorothy's all-powerful slippers were silver, not ruby).  Silver was a readily available commodity at the time and could be freely coined, providing a liquid and accessible  means of exchange that would free the "good people" of the heartland (the North and the South) from they tyranny of the industrial witches of the East and the West.  Dorothy, the proxy for the average American, gets her silver shoes early on but doesn't know what to do with them so she must follow the gold to Washington ("follow the money" whispered Deep Throat to Woodward and Bernstein) where, in the end, she discovers that the Wizard is nothing but a fraud, elevated to his office by happenstance and kept alive by deception, literally smoke and mirrors.

Frank Baum was a journalist and newspaper editor, very involved in the politics of the day, back in 1900 the people had ready access to basic commodities and the industrial revolution was just under way.  Since most Americans still produced something to make a living, the top 1% of the day gamed the system so services, banking, finance, law, accounting (not medicine) were more valuable than corn, wheat, finished goods etc.  This is the opposite of what we have now as the average American now performs services so the services have been devalued as the top 1% have an iron grip on commodities which are now levered up so that it takes fewer commodities to be exchanged for more of your
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Weekly Wrap-Up

The only way this month could be going better is if we were doing this well in a bull market.

I hate to be a bear but that's sure where the money has been this month and we were very lucky to have gotten out ahead of it.  As crazy as it seems, there is more "fast" money to be made on the downside than the upside, which is why I advocate always having a 30% contrary positions in your folder – as long as you pick weak stocks, it shouldn't hurt you so badly in a rally but it sure saves your virtual portfolio when things turn south on you!

I don't want to bore people with how spectacularly we're doing, members can pick up the virtual portfolio and see for themselves and I am aware that it's downright depressing for people who aren't doing well to read about how others are having a party so I'll just stick to the basics for this wrap-up.

I turned very bearish on Friday morning as the "fake" rally finally got to me and I had to just put my foot down and go short into the weekend.  We were short on oil, short on financials and short on the Dow and the Nasdaq, about the most bearish I have been since we started the new site.  There's nothing wrong with a nice sell-off, like we had late last month, those are nice and healthy once in a while.  The problem is having a sell-off like that (700 Dow points) and not bouncing back.

Both David Fry and I were very suspicious that the "rally" of last week was the work of the Fed and the "Plunge Protection Team" and bore no relation to an actual recovery in the making.  We got a good jobs number but we decided to ignore it and Tom Brown told us everything was fine in subprime land and we decided to have him committed…  My main plan on Friday was: "I could be totally wrong here, especially with a strong jobs report indicating a resurgence in the US economy but I’m going to put it on the line and short oil into the weekend so I’m just praying for them to rally that sector today so we can jump in and
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Friday Morning Markets

Here comes the CPI!

As I've said before, the CPI can wreck us.  The PPI was way up yesterday and the CPI may be worse because consumers don't employ purchasing managers who negotiate the best possible prices for them like the producers do – that's how we get to pay $3 a gallon for gasoline…

Now I'm a big fan of inflation, you can read all about that in my famous (and controversial) "Inflation Nation" article so I won't get into it here but I predicted this at the beginning of the week when I said: "Thursday we get the PPI, which has a ridiculously low expectation of .2% and the ever-depressing Philly Fed Index followed by Friday’s CPI, which should also be boosted by gasoline prices."

I also warned you a week ago to watch out for the manipulations of the infamous "Plunge Protection Team" and Denver points out that our man, David Fry, is on top of the case this week with evidence of $57Bn of your tax dollars being injected into the market in the past 2 days alone!  Take a look at yesterday's inflow chart and think how bad it might have been without the Fed's largess.  Now if our government is willing to do that, do we really think they are above fudging a few numbers to prop up the market as well?


"But Phil", you say, "these numbers are terrible – doesn't that prove they're legit?"  Not necessarily.  It could mean that the legitimate numbers are so horrifying that the entire economy would implode the minute they came to light and that our government is borrowing $100Bn a month from foreign investors by writing notes they can never repay just so they can shove this problem under the rug for one more month and pray for a miracle to save them.  Does that sound like any governments you know?

Still $57Bn is a lot of cash to throw around in a market that trades perhaps 2Bn shares on a good day so we can thank Uncle Ben for the reprieve, short-lived though it may be.  I pointed out yesterday in comments that you could see the cash being spent to rig the Dow as 9 of the top 16 components (by price) were being pushed positive…
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Friday Morning Virtual Portfolio Moves

Needless to say I’m nervous about the markets so I’m keeping close covers on the LTP, I’d rather be wrong and take a 10% hit rolling callers over than be right and lose a big chunk of our leaps.  Ordinarily I would let some nickels and dimes expire worthless but I don’t trust the weekend enough not to sell so (assuming margin requirements) I am rolling these today:

It is not my intention to make these hard numbers, these are the morning bids and I will place .05 lower bids pre-market to catch a few.  If the market is going down I will take what I can get (but not into a morning panic).  If there’s a drastic change, just ask!

  • AIG Selling Apr $65s for $3 (AIGDM)
  • AMZN Buying Back Mar $42.50 for .05
    • Selling Apr $37.50 for $1.65 (ZONDU)
  • BA Waiting until EOD (for lower price)
    • Roll Mar $90 to Apr $90 for $3 (BADR)
  • BSX DD on Jan $17.50s at $1.25 (WBXAW)
  • CAT sold Apr $65, no change
  • CC Buying Back Apr $20s for .05
    • Selling 20 (I have 40) Apr $17.50s for $1.20 (CCDW)
  • COF Selling Apr $75s for $3.50 (COFDO)
  • CY sold Apr $20s, no change
  • DALRQ still buying for .05 (WDAAZ)
  • FD Buying Back Mar $45s for .05
    • Selling Apr $42.50s for $2.70 (FDDV)
  • FXI Waiting for lower price
    • Roll Mar $94 (currently $4) to Apr $98 for $4.50 (FJJDV)
  • GE Holding Naked!  This is one of the few I will be happy to DD on
  • IMAX (earnings today) gamble play, shouldn’t be in this folder.
    • It’s in here so I stop looking at it during the day, no other reason
    • Selling 1/2 at .30 or better (if there’s excitement)
  • ISE .30 trailing stop to take out caller
    • After that, .50 trailing stop to sell Apr $45s for $4 (ISEDI)
  • KMI waiting for a downspike (there’s one every month)
  • KO Selling Apr $47.50s for .70 (KODW)
  • LVS Rolling Mar $100 put ($13.50) to Apr $95 put ($9.50) (LVSPS)
  • MOT Buying Back Mar $20s for .05
    • Selling 3/4 (35/50) Apr $17.50s for $1.30 (MOTDW)
  • MTU will DD at .80 (YYLAV)
  • PGR Selling 2/3 (30/50) Apr $20s for $1.35 (PGRDD)
  • SCI happy with this one
  • SHLD Buying Back Mar $175s for .25 (I hope)
    • Selling Apr 180s for $3.25 (KDUDP)

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Thursday Wrap-Up

Well the markets were quite blah today but they held up great considering the PPI showed wholesale prices rose at 1.3% last month, more than double the .6% forecast, and double the .2% forecast for the very silly ex-food and energy prices (silly because I know few people who go through their days without using either).

The premise of the ex-food and energy numbers is that food and energy prices are volatile and can go up and down from month to month so we should ignore their effect on general pricing.  For the past 4 years though, both food and energy have done nothing but go up – and up and up and up.

Tomorrow we'll find out how quickly these wholesale price increases are creeping into the CPI but it's a no-win situation.  If they are creeping in (they are) then inflation is on the march and the Fed may have to tighten while we worry if the Consumer may finally run out of cash.  If the CPI is benign, then the concern will be that margins are being squeezed and price increases can't be passed on because the Consumer has already run out of cash.

It seems to be a little of both because both the Philadelphia and New York Feds reported sharp drops in manufacturing activity in March.  The Philly Fed fell to .02 from .06 vs. an expected gain to 4.2 – and that was the good one!  The NY Fed reported an activity level of 1.85, down from 24.35 in February and WAYYY below the 17 that was expected.  The bank said Thursday in its Empire State Manufacturing Survey that "conditions for New York manufacturers were flat in March.  Measures of new orders, shipments, unfilled orders and employment fell, while prices paid and the average employee workweek increased." (see also Stagflation).

Meanwhile the WSJ survey of economists finds that sub-prime woes ARE likely to spread BUT they think the US will avoid a recession "and even a significant rise in unemployment."  Well aren't they an optimistic lot.  An interesting dissenting opinion comes from Jan Hatzius, chief U.S. economist at Goldman Sachs, who said: "Mortgage credit-quality problems go well beyond the subprime sector.  The underlying problem is not the subprime market per se, but the reset of
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Thursday Morning – In progress

“All human wisdom is summed up in two words – wait and hope”

- Alexandre Dumas Père




It is hard to wait for the right moment to deploy our capital.


We investors are, by nature, a hopeful group and we tend to get jumpy when the market looks hot, always worried we are going to miss something.  This is kind of funny because the people who are anxious to buy today are the same people who couldn’t wait to sell on Tuesday.


What changed?  We had this conversation just this weekend when I warned not to get too excited about a "dead cat bounce" yet now we have a weaker bounce and my mailbox is filled with questions from people who want to BUYBUYBUY.  I love buying stocks as much as the next guy but I prefer to buy stocks that ARE going up, rather than stocks that LOOK like they are going up (it’s a fine distinction).


I was excited to buy last week because we oversold because, as I said at the time: "QQQQ made a nice doji yesterday as volume tapered off to half of last week’s peak.  Look for the very rare "abandoned baby" pattern to form in the candle chart of the Qs (it will gap up at the open and finish the day at or above yesterday’s high) to signal a real reversal which could have all those shorts covering for the rest of the week."  I say this now to remind you know I can be bullish when I have a good reason to be!  More importantly, I can also be patient – and that is what is called for here.


The MSM (main stream media) does not want you to be patient – they need you to BUYBUYBUY because US investors control over $4 Trillion dollars in market wealth and if they lose
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Wild Wednesday Wrap-Up

Wheee - What a wild ride!


As soon as we got rid of those pesky Europeans our traders took control and turned the markets right around, it was great

I'm still a little skeptical, especially with options expiration coming up on Friday but we'll take what we can get in this amusement park, er I mean market.  Speaking of amusing, we had a blast in the oil patch today as the inventories came in with a pretty big draw but not big enough to keep oil companies aloft in a falling market.

At 9:43 I said: "Energy stocks are acting worried ahead of inventory or they’d have a better pump. Look for SU to pick up if this thing is real for them."  Then at 9:49, I called the whole market down: "Sorry guys – I’m not feeling it – this is some pretty wimpy buying so far and if the oil guys think it’s a smart time to push crude back to $59 they are in for a nasty surprise.  GS falling fast, GOOG about to break below $440, BSC, MER, MS all heading down – might be a good idea for some DIA $121 puts (.85) as a mo play."

10:03: "This can snowball into panic if we start losing our levels!"  Well snowball it did and we hit 11,950 just 3 hours later but zoomed right back right at 1pm.  Was all the selling pressure coming from Europe or were traders here waiting for Euro funds to stop trading before pumping up the markets?  I must say the suddenness of the turn took me by surprise and we were having chat issues today so I ended up slow on the trigger of the puts, even though I said in the morning: "Unless we get some really good downside follow through, I will be done with my short positions and keeping tight stops on our calls but sitting mainly in cash and looking for some buying opportunities."  Always stick to your plan unless you have a REALLY good reason to change it!

As I said this morning, when you are in the periapsis of your orbit (closest to the primary) it does tend to look like you're going to crash, the trick is not to crash and make a pass around the primary…
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Wednesday Virtual Portfolio Moves

Posted March 14, 2007 at 9:49 am | Permalink (Edit)

Sorry guys – I’m not feeling it – this is some pretty wimpy buying so far and if the oil guys think it’s a smart time to push crude back to $59 they are in for a nasty surprise.

GS falling fast, GOOG about to break below $440, BSC, MER, MS all heading down – might be a good idea for some

  • DIA $121 puts (.85) as a mo play.
Posted March 14, 2007 at 9:50 am | Permalink (Edit)
  • MRO on some kind of drugs this morning. Say thank you for the Apr $90 puts for $2
Posted March 14, 2007 at 10:37 am | Permalink (Edit)
  • VLO $60 puts at .30 but it’s not getting filled.
Posted March 14, 2007 at 10:52 am | Permalink (Edit)
  • I just bought the XOM $70 puts for .45 –

 Chat is broken today so I’m posting these manually:


  • Sold GOOG $430s for $11.30, stop at $12


  • GOOG spread
  • buying $460s for .25
  • selling $440s for $5, stop at $6 1:58
Posted March 14, 2007 at 3:29 pm | Permalink (Edit)
  • Sold NT Apr $25 puts for .60

Worried Wednesday

It’s time to talk about physics again.

Back in mid-December I wrote an article on Stock Market Physics and we talked about how I like to think about market movements as astronomical events that are governed by the laws of physics, specifically, orbital physics realting to gravity, mass, force and acceleration.

I’m not going to go all over it again but I will probably update it soon as there are many articles since then refining the concept but the key point for today is we have not yet fallen out of the orbital range we established in November, when we broke clearly away from the Dow 10K-11K range we had been in since early 2004.

Today is not a challenge for the bulls, we already expect a disaster.  The Hang Seng and the Nikkei EACH gave up 500 points last night on a combination of the US market melt-down, strong Yen performance and 2.7% inflation in China.  Europe fared no better with 100 point drops across the board (2%) but weighted to the financial sector (it was HBC who started this mess).

So the onus is on the bears to show us what they’ve got today.  The bulls have held the 12,000 line on the Dow since Nov 6th with only the briefest pinprick below it on March 5th.  If the bears can’t take us below 12,000 on a day like today, I think it only PROVES that 12,000 is a real market floor we can count on.  An orbiting body (let’s say the Dow) moves around it’s primary in an elliptical path, the "highest" point of the orbit is called the apoapsis (say 12,800) while the "lowest" part of the orbit is called the periapsis (say 12,000).  Only by observing the highs and lows of the orbiting body can we get a true idea of the exact position of the primary (market neutrality).


Unless we get some really good downside follow through, I will be done with my short positions and keeping tight stops on our calls but sitting mainly in cash and looking for some buying opportunities.  To sum it up:  At this point, if we don’t break down, it is very possible we WON"T break down!  Let’s keep an eye on some true bottoms but, like that S&P chart from 2004 I posted yesterday, there is nothing healthier than a good double…
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Member Alert – Hold Outs and Hold Ups

One thing people often forget to do in a crisis it to look for opportunities.

That’s not going to happen here!

We have a unique opportunity to study the market today so let’s use this space to make a list of stocks we watch that DIDN’T go down yesterday or that we notice early buying ineterst in today.

We all have our favorite sectors and there are hundreds of us so don’t feel like you need to scan the markets for everyone else, concentrate on the stocks you know best and just post up the ones you see that have surprising support.

These will become strong turn-around candidates we can discuss and analyze.  Don’t forget, if we get a real recovery, we are 800 points from the top so we have all the time in the world but we can start charting some of these strength stocks and have a nice set of upside plays ready when the market turns.

We’re looking for outstanding stocks so check your sectors and competitors and make sure they’re really outpacing the group and try to find out why.  For example:

SNDK was up .11 yesterday and never went negative.  They had a UBS upgrade in the morning and started off going from $40.25 to $41.50 but did give it all up and finished at $40.28 –

NVLS, on the other hand, had no news but held it’s line all day, far ahead of the bulk of the semis, certainly worth watching.

QCOM gapped up on an upgrade and held it all day, finishing up 4%.  They lifted their forecast  in the morning citing phone-chip sales.

Our goal is to gather some names to watch, track them against their peers during a rough week and see if we can come up with a few winners…


Phil's Favorites

Blodget on Market History


Outside the Box: Blodget on Market History

By John Mauldin

I remember the first time I walked into Henry Blodget’s new startup, Business Insider, back in 2009. Twelve fresh-faced kids were crammed into a room about the size of my bedroom, pounding away on laptops, creating a new destination website. He took me over to a corner; we sat down in front of a few cameras; and he began shooting question after question at me, later turning the session into a series of interviews.

You walk into his office today and it’s still packed wall-to-wall with fresh-faced kids (the older I get the younger they look), but the offices are much larger, and it seemed to me last time that there had to be at least 150 people in them. But the interviews are still quick-paced, even if they’re now conducted in a special room, with upgraded equipmen...

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Zero Hedge

"Neutralizing" John Lennon: One Man Against The "Monster"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by John Whitehead via The Rutherford Institute,

“You gotta remember, establishment, it’s just a name for evil. The monster doesn’t care whether it kills all the students or whether there’s a revolution. It’s not thinking logically, it’s out of control.”—John Lennon (1969)

John Lennon, born 75 years ago on October 9, 1940...

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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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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Zambia Seeks to Restore Confidence With Budget Amid Power Crisis (Bloomberg)

Zambian Finance Minister Alexander Chikwanda is seeking to restore confidence in the economy to help reverse the world’s worst currency, record borrowing costs and sliding growth. The two things that matter the most to the outlook are the copper price and power supply, which he has little control over. 

The World Bank is betting on mass migration driving the global economy (Business Insider)

The impact of&nb...

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Kimble Charting Solutions

S&P 500…Stuck in this zone, welcome to the “Chop House!”

Courtesy of Chris Kimble.


What do S&P 500 bull and bears have in common? There opportunities are being limited by a tight range!

I started sharing with members several weeks ago that the patterns suggested the S&P would be in a “Chop House” environment for a while and that I doubted bulls nor bears would be that happy of campers.

In this type of an environment, unless you are really quick, nimble and accurate, its a time and place to take it easy and let this play out. For the majority of traders, the distance between the close on 8/25 at 186 and the close of 200 on 9/16...

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Whitney Tilson On LL, EXACT, And Martin Shkreli


Whitney Tilson On LL, EXACT, And Martin Shkreli

Courtesy of Value Walk

1) The shares of one of my largest short positions (~3%), Exact Sciences, crashed by more than 46% yesterday. Below is the article I published this morning on SeekingAlpha, explaining why I think it’s still a great short and thus shorted more yesterday. Here’s a summary:

  • The U.S. Preventative Services Task Force’s Colorectal Cancer Screening Draft Recommendation issued yesterday is devastating for Exact Sciences’ only product, Cologuard.
  • I think this is the beginning of the end for the company.
  • My price target for the stock a year from now is $3, so I shorted more yes...

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Chart School

Yesterday's Losses Reversed

Courtesy of Declan.

Bulls can be happy with today's progress. What weakness emerged today was reversed by the close, a change on yesterday's action where sellers dumped in the last few minutes of trading. Volume climbed to register an accumulation day.

The S&P finished at the 50-day MA, but beyond that there is plenty of room beyond that to run to the next level of resistance at 2,045. Technicals are net bullish.

The Nasdaq pushed off its 20-day MA and has another 50 points of maneuver before it gets to its 50-day MA.  Technicals are not yet net bullish, but they are close.


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Sector Detector: Searching for solid support in the face of global headwinds

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

Courtesy of Sabrient Systems and Gradient Analytics

Uncertainty about the health of the global economy led investors to flee U.S. equities during Q3, primarily driven by worries about China's growth prospects and the Federal Reserve’s decision to not raise rates. Sure, there are plenty of real and perceived headwinds, but on balance it seems that a recession here at home is not in the cards. And when you consider sentiment and the technical picture, it appears that a continuation of Friday’s bounce is in store. The question remains as to whether the seasonally strong Q4 will be able to propel the bulls through levels of resistance that have built up.

In this weekly update, I give my view o...

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Swing trading portfolio - week of October 5th, 2015

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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Baxter's Spinoff

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

Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...

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Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 


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Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene


The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

Thank you for you time!

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.

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