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  1. phil

    Good morning!  

    News was once again terrible this morning, especially out of China and I could have written a whole post on that but thought it was a good time for a macro point about why we should be concerned about the market in any event.  

    I'm getting into a lot of silly conversations with people about value lately and I'm being lectured on how value doesn't matter if the market doesn't agree and we should just follow the "wisdom" of the crowd.  This is exactly the kind of BS we often hear at market tops and I'm not against a little momentum trading BUT, when people do it too often for too long – they tend to get it mixed up with their long-term premise and then they tend to bend their minds around to justify their decisions after the fact.  As Wikipedia notes:  

    There are two self-justification strategies: internal self-justification (IS) and external self-justification (ES).[5]

    Internal self-justification refers to a change in the way people perceive their actions. It may be an attitude change, trivialization of the negative consequences or denial of the negative consequences. Internal self-justification helps make the negative outcomes more tolerable and is usually elicited by hedonistic dissonance. For example, the smoker may tell himself that smoking is not really that bad for his health.

    External self-justification refers to the use of external excuses to justify one's actions. The excuses can be a displacement of personal responsibility, lack of self-control or social pressures. External self-justification aims to diminish one's responsibility for a behavior and is usually elicited by moral dissonance. For example, the smoker might say that he only smokes socially and because other people expect him to.

    That's the crux of the crowd-following arguments.  Everyone is doing it, so how bad can it be?  Well, it can be 2008 bad, is my answer.  And I'm not trying to come across all doom and gloom but I do tend to get more negative when I feel our Members may be getting too  positive (and vice-versa when too gloomy) to try to inject a bit of balance into the conversation.  

    We are in no better shape today than we were when I called for cashing out long positions at the end of last month.  We're using the same bounce levels we set on the 6th, when we first bottomed out and EXPECTED a bounce.  The whole point of the bounce levels is that we're either going to have weak ones, which keep us bearish, or strong ones, which make us neutral until either the 50% lines cross or the weak bounce lines fail to hold up.  

    • Dow 15,108 (weak bounce) and 15,216 (strong bounce)
    • S&P 1,622 and 1,634
    • Nasdaq 3,420 and 3,440
    • NYSE 9,280 and 9,360
    • Russell 975 and 981.40

    As I noted yesterday, when things were looking up, we also have to cross our 50% lines at 15,270, 1,640, 3,460, 9,400 and 985 and, at noon yesterday, only the NYSE and the Dow were red.  Now, it's just the RUT that's green and the S&P is right on the line (so we'll watch 1,640 very closely).  

    Also, as noted in the morning's news reading, 80% of the 107 S&P companies that have provided guidance updates for Q2 have LOWERED their outlook.  That's vs 62% "normally" (as the main reason people do pre-announce is to warn, of course).  Materials (of course), IT and Industrials are hardest hit, which makes the Dow a good short again as it attempts to get back over 15,200.  

    On the other hand, expectations are now so low, they'll be hard to miss with the S&P 500 now averaging 1.1% earnings growth (below the rate of buy-backs!), down from 4.3% on 3/31.  Keep in mind that the overall market is up 4% since 4/1 so there's a pretty big disconnect between the run-up we've had and the reality we're running headlong into!

    Oil hit $98.50 again on the usual 9am pump and, of course, it's a short again.  That's on /CL by the way, which is now /CLQ3 (Aug) in TOS, the old /CLN3 contract (July) also hit $98.50 already and dropped like a rock to $98.15.  

    Copper is melting down at $3.15 as this China thing is SERIOUS (and it's also serious when there's so many bad things to talk about that I don't have time to go over them all in one day!).  Nat gas is $3.90, gasoline is $2.88, gold is $1,378 and silver is $21.70.  

    The Dollar is 81.05, Euro $1.335, Pound $1.558 and 95.50 Yen to the Dollar with the Nikkei flying at 13,400 – that's up 300 since the index closed flat for the day.  

    The VIX i8s at 16.69 and TLT is 112.75 so no one seems very worried – but I still am.  

    Rumors that Bernanke is stepping down are gathering steam.  He wasn't scheduled to go to Jackson Hole since last year (a big deal was made about it then but it's some sort of personal conflict) but that won't stop people from "discovering" it now.  

    Hopefully, the Fed will give us a bit of clarity tomorrow but, even as I write that, I'm laughing…

    At the open: Dow +0.2% to 15211. S&P +0.13% to 1641. Nasdaq +0.21% to 3459.

    Treasurys: 30-year -0.23%. 10-yr -0.15%. 5-yr -0.1%.

    Commodities: Crude +0.39% to $98.41. Gold -0.73% to $1372.95.

    Currencies: Euro -0.06% vs. dollar. Yen +1.13%. Pound +0.91%.

    Market preview: U.S. stock futures and European shares are flat-to-higher after U.S. CPI comes in slightly below expectations and as the FOMC meets on the first day of a two-day policy meeting. The S&P Mini is flat. "Today should be quiet, as people are only asking about tomorrow," says economic strategist Andrew Wilkinson. Sony is +4.25% after Dan Loeb ups the ante over a spin-off for the company's entertainment division. Ongoing: Paris Air Show 

    "The biggest contrarian play in the market today is assets linked to China (FXICAF)," says Michael Hartnett, summarizing BAML's latest Fund Manager Survey, which shows money flowing out of commodities (DBC) and emerging markets (EEMDEMVWO). Where's the money going? The eurozone and the U.S. Where it's not going is fixed-income (AGGBND) – 50% of managers say they're now underweight bonds as opposed to 38% last month.

    May Housing Starts: 914K vs. 950K forecast, 856K previous (revised from 853K).

    More on Housing Starts: Total starts were up 6.8% from April, up 28.6% from a year ago. Single family starts in were about flat M/M. Total building permits of 974K fell 3.1% M/M, and gained 20.8% Y/Y. Single family permits rise 1.3% M/M. (full report) 

    May Consumer Price Index: +0.1%;vs. +0.2% expected, -0.4% prior. Core CPI +0.2%; in-line with expectations, +0.1% prior.

    The FOMC will be able to chew on inflation data for May when it meets today, with the reading due out this morning.Economists expect that CPI rose 0.2% on month after sliding 0.4% in April, driven up by slightly higher food and gasoline costs. "Inflation is low in the U.S. at the moment, giving the Fed more room to wait for improvement in employment before it starts tapering," say analysts at Danske Daily.

    ICSC Retail Store Sales: +0.3% W/W, vs. -2.7% last week.+2.5% Y/Y vs. +2.2% last week. 

    More on ICSC Retail Sales: The retail sector put in a mixed week with department stores, electronics store chains ([[RSH[[, BBY), and drug stores (CVSWAG, RAD]]) strong for the period, but sales at dollar stores (DGDLTRFIVEFDO) and wholesale clubs (COST,PSMT) notably weak. After last week's drop in sales cut into forward progress, the year-over-year gain in retail chain store sales stands 2.5% higher after threatening a 3% pace earlier in the year. 

    Redbook Chain Store Sales: +2.9% Y/Y vs. +2.8% last week. 

    MSCI's reclassification of Greece to emerging market is a yawner as far as ETFs go, writes Dennis Hudachek, as the country's presence in the EFA is less than 0.10%. With Coca-Cola Hellenic (CCHBF.PK) no longer part of the MSCI Greek Index, the country's addition to the EEM will be of minimal effect. 

    China's determination to reign in the rapid growth of credit is being tested by a short-term credit squeeze at banks, with rates in the interbank funding market soaring and foreign-capital inflows slowing. The banks want the People's Bank of China to inject liquidity by cutting the reserve-requirement ratio, but so far the PBOC is holding firm and maintaining the tight conditions. 

    nasty bout of late-session selling sends Thai shares (THD-3.4%) plunging nearly 3%, bucking a generally positive regional trend. Philippine stocks (EPHE +2.3%) rise 2.83% in Manila while shares in Indonesia (IDX +1%) and Singapore (EWS +0.9%) post solid gains.

    FU Oppenheimer!  Oppenheimer lifts its price target on SodaStream (SODA) to $85 following the company's intriguing deal with Whirlpool to jointly develop a home carbonation system. SODA +1.5% premarket to $72.05. 

    The rumored iWatch will be more "hobby" than major product line for Apple (AAPL), says Jefferies' Peter Misek. Likely not having a cellular chip, the iWatch would need to be paired with an iPhone for full functionality. Starting with some pricing assumptions and then slapping a 5% penetration on the installed iPhone base of 250M would move the EPS needle by only about 1%. 





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Zero Hedge

Everything That Is Wrong With Banking Today

Courtesy of ZeroHedge. View original post here.

Submitted by smartknowledgeu.

Here is the latest SmartKnowledgeU Podcast #5: "Everything Wrong With Banking Today".

To listen to this podcast on YouTube, please click the above image and then click the link "Watch this video on YouTube."

For those of you that would like a downloadable mp3 file of any of our podcasts to listen to at your leisure on your smartphone or iPod, please visit https://www.apple.com/itunes, log in to iTunes and then search the iTunes store for the "smartknowledgeu podcast" which will contain
all of our downloadable podcasts for free. To be informed of when we rel...



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Chart School

ADP Employment Report for April Disappoints Expectations

Courtesy of Doug Short.

The economic mover and shaker this week is the Friday employment report from the Bureau of Labor Statistics. This monthly report contains a wealth of data for economists, probably the most publicized in the near term being the month-over-month change in Total Nonfarm Employment (the PAYEMS series in the FRED repository).

Today we have the April estimate of 169K new nonfarm private employment jobs from ADP. That is the lowest number since the 157K in January of last year, 15 months ago. In addition, the previous month's estimate was revised downward from 189K to 175K.

...

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Phil's Favorites

Experts Are Warning That The 76 Trillion Dollar Global Bond Bubble Is About To Explode

Experts Are Warning That The 76 Trillion Dollar Global Bond Bubble Is About To Explode Courtesy of Michael Snyder, Economic Collapse 

Warren Buffett believes “that bonds are very overvalued," and a recent survey of fund managers found that 80 percent of them are convinced that bonds have become “...



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Kimble Charting Solutions

Bond players are very scared of this…

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

Bond investors loved the swift decline in Crude Oil that started last fall.

As Crude Oil was falling 60%, popular bond ETF TLT rallied 24%.

As TLT was hitting resistance, Crude Oil was making an attempt to put in a double bottom.

Once Crude Oil looked to have created a “W” bottom at support and started a historic rally, TLT has been falling swiftly, breaking below rising channel support of late.

Has Crude rallied enough? Crude has impacted bond players for months, watch Crude closely in the days ahead!

-

To become a member of Kimble Charting Solutions, click ...



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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

Sector Detector: Bulls hold the line as market coils in anticipation of a bigger move

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

Courtesy of Sabrient Systems and Gradient Analytics

After posting record highs the previous week, stocks closed last week slightly down overall. But the major indexes held their psychological levels, including Dow at 18,000, S&P 500 at 2100, NASDAQ at 5,000, and Russell 2000 at 1200. Although the bulls continue to find reliable support levels nearby, strong overhead technical resistance and neutral-to-defensive rankings in our SectorCast fundamentals-based quant model continue to suggest that a major upside breakout is not quite imminent, although a selloff doesn’t seem to be in the cards, either. Overall, stocks appear to be coiling ever tighter while awaiting...



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OpTrader

Swing trading portfolio - week of May 3rd, 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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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. 

Since...



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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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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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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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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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