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  1. phil

    Good morning!  

    Weather finally got better so we're having a lovely weekend, hope you guys are too.  

    Right now there's a pack of girls sleeping over so this is the only quiet time I get!  

    Obama had a nice meeting with Xi, apparently so we'll see if any new initiatives get announced.  

    President Obama yesterday warned Chinese counterpart Xi Jinping to halt his country's hacking of U.S. businesses, saying that continuing the cyber-theft would be a very difficult problem in the nations' economic relationship. Meanwhile, China wants a "level playing field" for its companies that invest in the U.S. Despite the areas of contention, one Chinese participant called the "shirtsleeves" summit "constructive, strategic and historic."

    Meanwhile, China factory prices fell 2.9% in May, indicating crap demand and that's accelerating from 2.6% down in April.  They're talking about a "weak" Q2 and, don't forget, Chinese companies release earnings too, so it's not just US companies we should be concerned about.  

    "In the corporate sector the overall situation is still bad, especially for small and medium-sized enterprises," said HSBC economist Ma Xiaoping. "Output prices are decreasing, which could reflect deteriorating profit margins for them."

    Meanwhile, the central bank said on Sunday that Chinese financial institutions issued 667.4 billion yuan ($107.6 billion) of new yuan loans in May, down from 792.9 billion yuan in April and below economists' expectations. Total social financing, a broader measurement of credit in the economy, came to 1.19 trillion yuan in May, down from 1.75 trillion in April.

     

    The broad M2 money supply also expanded at a slightly slower pace, climbing 15.8% at the end of May compared with a year earlier, against the 16.1% rise at the end of April.

    15.8%!!!  Holy crap, and we thought our Fed was printing a lot of money!   When this Global House of cars finally goes off the rails – it's going to be look out below (crash) or look out above (hyper-inflation) – that's why things are so tricky to play this year and that's why I like – CASH!!!

    Speaking of discounts:  

    Bargain-basement Buffett: After five years of climbing prices to win the annual "lunch with the Oracle of Omaha" auction – last year's winner paid $3.46M - the winning bid this year was a relatively measly $1,000,100. According to eBay there were 106 bids; the winner bidder is as yet unidentified.

    At the close: Dow +1.36% to 15246. S&P +1.28% to 1643. Nasdaq +1.19% to 3465.

    Treasurys: 30-year -1.17%. 10-yr -0.64%. 5-yr -0.34%.

    Commodities: Crude +1.47% to $96.16. Gold -2.66% to $1378.15.

    Currencies: Euro -0.21% vs. dollar. Yen +0.47%. Pound +0.29%.

    Market recap: Stocks powered up and closed near session highs after the monthly jobs report painted a Goldilocks picture of steady economic growth that's slow enough for the Fed to maintain its stimulus policies. Fund clients added to positions and hedge funds closed out some bearish bets, as some of the calm that had prevailed for much of the year was restored. The dollar nosed higher and Treasury prices fell in choppy trading.

     

    F'ing unbelievable:  HFT Robot Art

    Irrespective of today's strong jobs numbers, Doug Kass is sticking to his bearish thesis that market is headed much lower from here. The problem, Kass says, is that "central bank liquidity blurs the line of demarcation between economic reality and stock market euphoria." The narrative now is whether the Fed is simply "pushing on a string," and Kass thinks many market participants are coming to this 'aha' moment." (Video).

    This is the way Blue-Collar America Ends - Automation, computers, robots, higher skill requirements for workers, out sourcing jobs to cheaper labor markets, bringing in cheaper skilled/trained workers from over seas, all are working against the working people. This appears to be a trend and I don’t see most of it stopping soon. The future is here. So where do middle class workers go, lower paying service jobs, unemployment, or fall off the cliff. I see lots of unemployment/ under employment being a permanent thing with standards of living for the masses continuing to fall.

    It's looking like the June policy meeting when the Fed will officially signal it's set to begin tapering asset purchases, according to Jon Hilsenrath. Yesterday's lukewarm jobs reports removed pressure to act right away, but the prerequisite necessary to cut back QE – an improving economy – has been met.

    Twenty-Year Anniversary of Market Backstops

    The percentage of the stock market now owned by hedge funds (5%) is the highest since Q2 2008, BofA Merrill Lynch finds in its Hedge Fund Quarterly Report. Hedge funds reduced cash holdings to the Q2 2007 trough of 4.3%, and raised net equity exposure to the Q2 2007 peak of 59%. Their largest exposure is to consumer discretionary stocks (XLY) followed by IT (XLK) and financials (XLF).

    The rout in junk bonds over the last 5 weeks is well known, but now leveraged loans (BKLNSNLN) have joined the tumble, notes Barclays. It suggests credit is becoming an issue along with higher rates as leveraged loans are floating rate and would seemingly be unaffected by rising Treasury yields. Also affected are short-term high-yield ETFs: HYSSJNK. 

    Watch out when Cramer makes convoluted arguments about why you should be bullish against bearish signals!  CNBC's Jim Cramer isn't worried so much about Fed tapering anymore. He's watching the 10-year bond. "When the ten-year goes down," Cramer says, "people step in and start buying." Stocks like Whirlpool (WHR), Toll Bros (TOL) banks that are levered to mortgages. If we can get 10-year rates to around 2.01% there, he thinks we could have a big rally. (Video). 

    Construction Improves, Yet Is Still Historically Low

    What does it mean to have “predicted the crisis”? (Noahpinion)

    Boring stocks can bring exciting returns, Mark Hulbert discovers, as his research reveals stocks exhibiting the least historical volatility on average comfortably outperform the most "exciting" (i.e., volatile) issues. One believer in the boring-is-beautiful school, Guggenheim Partners' Nardin Baker, likes these stocks: SODKMB,CLCOST. Too volatile are AAPLGSCMSHPQMET.

    Worried about the dreaded QE taper and the market volatility that will likely accompany it? Consider buying shares of CME Group (CME) and CBOE Holdings (CBOE), Barron's says. CMEshould benefit from ambiguity regarding the direction of interest rates as a quarter of "clearing and transaction-fee revenue [comes from] interest-rate derivatives," and CBOE has seen VIX trading volumes rise 111% Y/Y through May. (Also: Wells Fargo likes CME)

    Japanese Prime Minister Shinzo Abe plans to introduce tax cuts for capital expenditure in the autumn as part of the government's sweeping plan to pull the economy out of deflation. The lack of a nationwide reduction in corporate tax disappointed markets when Abe initially unveiled the program last week. He also wants to scrap regulations that shackle research and investment.

    Chinese industrial production +9.2% on year in May vs +9.3% in April and consensus of +9.3% also. Retail sales +12.9%, as expected, vs +12.8% in April. Fixed-asset investment excluding rural areas +20.4% in January-May vs +20.6% in January-April and +20.5% forecast. New local-currency lending -15.9% to 667.4B yuan ($109B), missing forecasts. Aggregate financing +4.4% to 1.19T yuan. "On balance, this weekend’s data is likely to strengthen the calls for a more expansionary macroeconomic policy stance," says RBS economist Louis Kuijs.

    China's exports +1% on year in May vs +14.7% in April and consensus of +5.6%. Imports -0.3% vs +16.8% and +6.6%. Trade surplus +12.3% to $20.4B vs consensus of $19.3B. The sharp slowdown in exports reflect a crackdown on invoicing, which is thought to have distorted the April data, especially regarding Hong Kong. Imports of copper and copper products -14.5%, indicating stuttering domestic demand

    Jeff Immelt believes China is serious about cleaning up its environment, and the GE CEO says he will "double down" his clean energy investments there. But Immelt worries that western CEOs who throw around terms like "green" and "sustainability" are hurting their own cause: "When a Chinese CEO hears the word sustainability, he thinks they're being lectured to by the U.S. on how to do things in an uneconomical way."

    Six families in Pennsylvania are angry with Chevron (CVX) and claim the company's gas wells have made it impossible to "quietly use and enjoy" their land. The Fayette County group seeks "unspecified compensatory and punitive damages" tied to what they say are the pernicious effects of twelve nearby wells which allegedly leak natural gas, methane, and "other toxic radioactive substances," according to documents reviewed by Bloomberg. The suit has not been verified with court records. 

    Ballard Power (BLDP +16%) soars again today on heavy volume. In an earlier press release, the company noted that recent growth in shipments of its ElectraGenTM Telecom Backup Power systems is being driven by the need for backup power in Asian, African and Latin American regions with regular, even daily, power outages due to unreliable electricity grids, as well as markets with reliable grids yet vulnerable to extended power outages in crisis situations.

    GT Advanced (GTAT-2.8% AH after filing a $50M mixed shelf. The struggling solar/LED equipment maker only says it will use the proceeds for "general corporate purposes." GT had $320.2M in cash and $259.6M in debt on its balance sheet at the end of Q1, or a net cash balance of $60.6M. That's down from a net cash balance of $275.9M a year earlier.

    Several plant scientists are questioning conclusions Monsanto (MON) drew from its investigation of an escaped GMO wheat variety, and say there is still a risk that rogue grain is in the seed supply. “Sure they tested it, but that doesn’t mean it’s all clean,” says one. “It just means it’s not so widespread that it could be detected easily."  - Here's a great quote from the Monsanto Representative

    Tesla's (TSLA) a short says Barron's Bill Alpert in a cover story which rehashes familiar arguments, but notes the shares – recently essentially unborrowable – can now be had for a single-digit interest rate. Perhaps the most interesting part of the story is Elon Musk hanging up on Bill Alpert during an interview for the piece: "I have no interest in an article that debates what we consider to be an obvious point – which is that there is a dramatic reduction in battery costs … I am terminating this interview." 

    GameStop's (GME +6.2%) big rally on the Microsoft Xbox One trade-in news "is a gift to short sellers," says SA Pro's Josh Burwick. "Great entry point here." The entry point was even better 3 weeks ago when Burwick penned a piece arguing negative catalysts were emerging and for investors to "look out below." 

    Maxim's John Tinker thinks shares of Barnes & Noble (BKS) are cheap (does that still apply after today's rally?), but says he wouldn't be surprised "if the quarterly numbers are worse than expected" given the likelihood that Chairman Leonard Riggio will "be looking to pay as little as possible" for the retail division. Tinker notes that the retailer trades at a historically low EV/EBITDA ratio.

    Tech companies may be telling the truth by saying they have not provided the National Security Agency with full access to their servers, but they have reportedly taken steps to make data-sharing with the government easier. For example, Facebook (FB) has built a separate and secure portal to which it can deposit data requested by the NSA. Other companies that negotiated with the government include Google (GOOG) Microsoft (MSFT), AOL (AOL) and Apple (AAPL); Twitter has limited its co-operation as much as possible.

    While Sprint (S -1.3%) slumps on a report SoftBank (SFTBF.PK) is talking with Deutsche Telekom (DTEGY.PK) about buying its 74% stake in T-Mobile USA (TMUS +4.1%) should the Sprint deal falter, Dish (DISH +1.5%) has spiked higher, as investors take the report as a sign SoftBank would rather abandon its Sprint efforts than significantly raise its bid. Sources tell Reuters SoftBank and DT have been talking since last year, but that talks "intensified" following Dish's $25.5B offer for Sprint. Clearwire (CLWR +3.3%) has also moved higher, and is now $0.02 above Dish's $4.40/share offer price. (previous) 





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Phil's Favorites

Valuations: Maybe I am Crazy

Courtesy of Mish.

Relative vs. Absolute Value

As I watch valuations on stocks soar higher and higher into the stratosphere, I keep asking "where is the value?"

The problem for most is confusing "relative" value vs. absolute value. Stocks may be "cheap vs. bonds" but what does that matter if bonds are ridiculously overpriced?

Fair Value Has Three Digits

John Hussman has an interesting post this week entitled Fair Value on the S&P 500 Has Three Digits.

The last time I quoted Hussman, a manager for a prominent investment firm emailed something on the lines of "Mish, please do yourself a favor and stop referring to Hussman".

Actually, that was likely be good advice. The problem I have with the advice is simple: I happen ...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker.

Please review a collection of WWW browsing results.Date Found: Tuesday, 13 January 2015, 01:43:37 PM

Click for popup. Clear your browser cache if image is not showing. Comment: Ouch! See the last point of demand between $60 and $70 In Dec at resistance, now strong selling, Large pattern forecast sees a price under $40

Date Found: Tuesday, 13 January 2015, 06:54:16 PM

Click for popup. Clear your browser cache if image is not showing. Comment: Coffe ETF bounces off support, minor spring, if get some strength to $40, a trade may be on!

Date Found: Friday, 16 January 2015, 01:03:56 PM

Click for popup. Clear your browser cache if image is not showing. Comment: Apple forming a continuation stepping sto...



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Insider Scoop

Benzinga's M&A Chatter for Monday April 27, 2015

Courtesy of Benzinga.

The following are the M&A deals, rumors and chatter circulating on Wall Street for Monday April 27, 2015:

Swedish Orphan Biovitrum AB Confirms Receipt of Preliminary and Conditional Non-binding Proposal for Acquisition of All Shares Issued by Company

The Proposal:
Swedish Orphan Biovitrum AB (OTC: SWTUY) confirmed Monday, that it has received a preliminary and conditional non-binding proposal in relation to a possible offer for all shares issued by the company. The company issued statemetn in repsonse to media reports.

...



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Zero Hedge

Charting American Oligarchy: How The 0.01% Contributes 42% Of All Campaign Cash

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

This is an economic fight, but this is also a political fight. The biggest financial institutions aren’t just big – they wield enormous political power. Last December, Citibank lobbyists wrote an amendment to Dodd-Frank and persuaded their friends in Washington to attach it to a bill that had to pass or the government would have been shut down. And when there was pushback over the amendment, the CEO of JPMorgan, Jamie Dimon, personally got on the phone...



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Sabrient

Sector Detector: Sector rotation model stays bullish, but neutral rankings and technical resistance flash caution

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

Courtesy of Sabrient Systems and Gradient Analytics

Last week, stocks cycled bullish yet again. In fact, the S&P 500, NYSE Composite, and NASDAQ each closed at record highs as investors positioned for the heart of earnings season in the wake of strong reports from some of the Tech giants. Notably, Utilities stocks got some renewed traction as yield-starved investors returned to the sector. Although our trend-following sector rotation model remains bullish, strong overhead technical resistance and neutral rankings in our SectorCast quant model indicate that caution is in order, and this might not be the moment for a major upside breakout, particularly given the expected softne...



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Kimble Charting Solutions

Apple weekly breakout in play, $150 remains upside target

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

Apple closed last week at an all-time weekly closing high at (1) in the chart above. Apple recently broke above its 4-year rising channel, came back to test old resistance and pushed higher, setting this new record high.

In November of last year, when Apple was trading below $110 per share, the Power of the Pattern shared that Apple’s upside target stood at $150. (See post here) 

Below is a long-term update on Apple

...



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OpTrader

Swing trading portfolio - week of April 27th, 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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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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Digital Currencies

Why Bitcoin's male domination will be its downfall

Here's an interesting argument by Felix Salmon, although I think he is taking two correct observations and mistakenly attributing a cause-and-effect relationship to them: Bitcoin is going nowhere because women are not involved.

More likely, in my opinion, women are not involved in bitcoin because bitcoin is going nowhere (and they know it). Or maybe, simply, bitcoin is going nowhere and women are not involved. 

Why Bitcoin's male domination will be its downfall 

By Felix Salmon

Nathaniel Popper’s new book, Digital Gold, is as close as you can get to being the definitive account of the history of Bitcoin. As its subtitle proclaims, the book tells the story of the “misfits” (the first generation of hacker-l...



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Promotions

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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Market Shadows

Kimble Charts: South Korea's EWY

Kimble Charts: South Korea's EWY

By Ilene 

Chris Kimble likes the iShares MSCI South Korea Capped (EWY), but only if it breaks out of a pennant pattern. This South Korean equities ETF has underperformed the S&P 500 by 60% since 2011.

You're probably familiar with its largest holding, Samsung Electronics Co Ltd, and at least several other represented companies such as Hyundai Motor Co and Kia Motors Corp.

...



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Mapping The Market

S&P 500 Leverage and Hedges Options - Part 2

Courtesy of Jean-Luc Saillard.

In my last post (Part 1 of this article), I looked at alternative ETFs that could be used as hedges against the corrections that we have seen during that long 2 year bull run. Looking at the results, it seems that for short (less than a month) corrections, a VIX ETF like VXX could actually be a viable candidate to hedge or speculate on the way down. Another alternative ETF was TMF, a long Treasuries ETF which banks on the fact that when markets go down, money tends to pack into treasuries viewed as safe instruments. In some cases, TMF even outperformed the usual hedging instruments like leveraged ETFs. There could of course be other factors at play since some of 2014 corrections were related to geopolitical events which are certain...

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Pharmboy

2015 - Biotech Fever

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

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



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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 jennifersurovy@yahoo.com 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.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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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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