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Phil's Newsletter

Our Stock of the Year Turns out to be the Best Stock of the Year!

Apple knocked it out of the park! 

Last night, AAPL reported the most profitable quarter of any company in history – EVER!!! – making $18.04Bn in the last 3 months of 2014.  That's $8.3M per hour in PROFIT with almost $1Bn/day in revenues ($74.6Bn for the quarter).  The company made $3.06 for each $109 share and that was already up 10% since last Q.  

I'm sure NOW it is obvious why AAPL was our Trade of the Year in 2012 ($52 when we made that pick) as well as 2013 ($72) and again this December, even though it was alread hitting $110 after the split. Of course, we didn't just play the stock at PSW, we played the options and our Top Trade Idea for Dec 17th was:

  • 20 2017 $90/120 bull call spreads at $13.50 ($27,000)
  • 20 short 2017 $85 puts at $9.50 ($19,000) 

Our 2013 Trade of the Year is pictured on the left and made the full 614% expected and our 2014 Trade of the Year parlayed that money into the following:

  • 10 2016 $450/600 bull call spreads at $65 ($65,000)
  • 10 short 2016 $450 puts for $41 ($41,000)

That trade is already 100% in the money and will make the full $126,000 (525%) if AAPL holds $85.72 (post split), which is why we were able to be be nice and aggressive with our 2015 Trade of the Year, going for another 650% if
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Testy Tuesday – MSFT, CAT and PG Paint a Poor Picture

INDU WEEKLYBig Misses!  

CAT's earnings are a grave concern as they are generally a good indicator of the Global Economy and the low demand for oil and other commodities led the mega-corp to miss by 20% with a 25% drop in Q4 profits.  MSFT and PG were also disappointing but you can watch the MSM for that analysis, so I won't bore you.

What I will tell you is how you can make HUGE amounts of money off this information and that was easy as we simply shorted they /YM Futures this morning in our Live Member Chat Room at 17,550 and already the Dow is down another 150 points at 17,400 for a very nice $750 per contract winner.  This is one of the best uses of the Futures, getting a huge jump on people who have to wait for 9:30 to trade the market – HOURS after the news comes out. 

Of course we got the MSFT news last night and MSFT is a Dow component and, of course, 17,600 is the Must Hold line on our Big Chart, so it was a natural shorting line, per our 5% Rule™.  Now that we've had our morning fun, we'll have to see what sticks but we already shorting the Russell (/TF Futures) at 1,200 as well as we don't think much of the data we're seeing so far:

Even as I write this (8:07), /TF is crossing below 1,190 (now our stop), which is up $1,000 per contract since our live call to short it in chat at 6:49 this morning (sent out to our Members as an Alert).  What can be more obvious than shorting the Dow when 3 Dow components miss on earnings?   This is what we teach our Members to do at Philstockworld – obvious stuff that makes money!  

Other obvious plays were going long on /NG (Natural Gas Futures) when it was going to snow (up $750 per contract yesterday) and long on oil when GS pushes it back down to $45 with more scary announcements that it will go to $30 (this time with charts!), which is exactly
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Monday Market Mayhem – Greece is the Word, Again

The Anti-Austerity Party won in Greece yesterday

What it means for the markets is hard to say on day one of the new Government but it's not looking good for the people who Greece still owe over 300Bn Euros to.  As you can see from this chart, that's 170% of their GDP and, frankly, its unpayable and it's ridiculous to pretend otherwise.  Yet, for the past 6 years, instead of helping Greece out by forgiving or refinancing the debt at low rates, the EU has lent them more money in exchange for ramming harsh austerity measures down their throats.

What a shocker that 6 years of bottowing another $130Bn without using any of it to boost the economy (cutting back all stimulus spending, in fact) did not, in fact, lead to an economic recovery in which the debt was paid off.  In fact, the debt is 70% worse and that doesn't go away and the now the lender (the ECB and their Bankster Buddies) want MORE austerity to make sure they get paid first.

Well BS to that says any rational person and BS said Greece this weekend as they voted in Alexis Tsipras and his Syriza Party, who are now just 2 seats shy of a full majority in Parliament.  Already though, Tsipras has calmed the markets by calling for gradual negotiations with the EU, not an outright revolt:  

“There will neither be a catastrophic clash nor will continued kowtowing be accepted,” Tsipras, 40, told crowds of cheering supporters in central Athens late Sunday. “We are fully aware that the Greek people haven’t given us carte blanche but a mandate for national revival.” 

Of course, he hasn't actually been sworn in yet.  The Syriza party is a Socialist, almost Marxist party – they believe in taxing the rich and raising minimum wages – and not in the wimpy way the US Democrats believe in it – it's going to be a very interesting couple of weeks.  Make that months, actually as the real tipping point comes in August, when Greece needs Billions in new financing to repay/rollover bonds held by the ECB. IMF loans…
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Thank Draghi It’s Friday

One Trillion Euros!  

It sounds like a lot of money but, already today, it's worth $40Bn less than it was on Tuesday.  Since Draghi's QE program doesn't begin until mid-March, at this pace (-$20Bn a day) by March 20th the whole Trillion will be gone – how's that for a magic trick?

Of course we don't think the Euro will keep falling to zero over the next 50 days but losing 2% per day of your entire net worth, even for just a couple of days, is bound to have some investors jumpy about their Euro-denomiated assets.  That's why the Euro continues to slip towards parity today ($1 per Euro), hitting $1.11 this morning, after opening yesterday at $1.165.  

UUP WEEKLYOur mighty Dollar flew up to 95.77 this morning as investors flocked to safer harbors.  It's really the US or nothing now as Abe has desroyed they Yen and China's Bad-Loan Ratio jumped 10% in Q4, now making up 1.29% of outstanding debt and forecast to climb to 1.6% by the year's end.  

The 0.13 percentage-point increase in the bad-loan ratio was the biggest since the regulator began compiling quarterly data in 2004 and another 0.31% by the end of 2015 will, of course, make this the worst year on record.  

Nonetheless, we are back on a bullish run in the Global Markets as everyone loves free money.  Well, everyone who's rich, anyway – and anyone else doesn't matter, so party on people!  

SPY  5  MINUTEAs I mentioned in yesterday's post, we were long in the morning, then flipped short after Draghi's announcement gave us an initial pop and then we flipped long again at 10:28 in our Live Member Chat Room and you can see how well those calls went for the day.

Those of you who read us regularly know that our long line for Natural Gas Futures (/TF) is $2.825 and we got anoter entry there yesterday as well with a very nice $750 per contract run back to $2.90 yet again (and up over $1,000 this morning at $2.925).  

We had another opportunity to go…
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Draghi Fever Thursday – Catch It!!!

gifnews animated GIF

I've got Draghi fever, she's got Draghi fever
We've got Draghi fever, we're in debt
She's gone Dollar crazy, I've gone Euro hazy
Ain't no thinking maybe, we're in Debt

The ECB kept rates on hold this morning but that doesn't matter.

What matters is the unveiling of Mr. Draghi's mad plan to boost the EU Economy (such as it is) through a bond-buying program of AT LEAST $55Bn per month.  Anything less than that will be VERY DISAPPOINTING as the markets have already baked in some massive QE from Draghi and the ECB

BalanceRealistically, there's almost nothing Draghi can do to "fix" Europe today or to meet the inflated expectations of the market.  

Sure we may get a pop on a nice program but it's not likely to last and we still have the Greek elections on Sunday, which can throw the whole Union back into turmoil next week.

As you can see from the chart above, Draghi is expected to annound a stimulus program that already puts the ECB's balance sheet back to where it was at the height of the Greek crisis (the 2nd one) and that's without (officially) a new Greek crisis – so it's a Hell of a lot of firepower spent just to fight the deflationary bogey-man.  

As noted by Bloomberg, Draghi still has to negotiate the tricky issue of buying government bonds at the negative yields currently prevailing across much of the euro zone. Paying for the privilege of storing money in, say, a three-year French bond effectively locks in a capital loss if you get back less than you paid.

A lawyer could argue that that constitutes "monetary financing" of governments, which is forbidden by the monetary union treaty. Draghi has already seen off one legal challenge to his power to buy bonds; that fight may be rekindled in the near future.

8:40 Update:  Draghi announces 60Bn Euros per month of easing ($70Bn), so 20% more than expected and it's through Septermber 2016, at least!  That sent our Futures up over our bullish target levels (…
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Wary Wednesday – Waiting for Draghi to Save Us

The state of the union is STRONG!

That was the word from our President last night as he set the agenda for his last two years in office.  The GOP response was a very predictable no way and Uncle Rupert's Journal didn't waste a second publishing a front-page editorial blasting the President for his ridiculous idea of having the rich pay their fair share of taxes in order to improve the lot of the middle class.  

In the 1944 film “Gaslight,” a con artist manipulates his new wife psychologically to make her doubt her own sanity in a scheme to steal her inheritance. That’s increasingly the way to understand President Obama ’s behavior toward Congress and especially the tax increase he floated in Tuesday’s State of the Union. The only plausible rationale is that he thinks he can gain politically by driving Republicans nuts.

It goes downhill from there…  The true State of the Union is going to be two years of gridlock and bickering with nothing much being done – not too different from the last 6 years or the rest of the century, which has seen average household income drop 10% while the top 1% tripled their wealth.  

Can we really afford 2 more years of the same?  Romney and Bush III want to make it 10 if they can.  Joni Ernst (I know, who?) delivered the GOP response, which centered on a promise to repeal the Affordable Care Act, "which has hurt so many American Families," though she couldn't actually name one, when asked later.  Instead, in her speech she said:

Growing up, I had only one good pair of shoes. So on rainy school days, my mom would slip plastic bread bags over them to keep them dry.  But I was never embarrassed. Because the school bus would be filled with rows and rows of young Iowans with bread bags slipped over their feet.  Our parents may not have had much, but they worked hard


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Technical Tuesday – Can Draghi Give Us Strong Bounces?

2,027 is our goal today for the S&P.

After that, we'll turn our attention to 2,040 tomorrow (the 10% line on our Big Chart) and we need 22 Nasdaq points to make that strong bounce line and then we'll look for 4,700 to come back on MORE FREE MONEY from the ECB on Thusday.  

Our Bounce Lines from last were were (and still are):

  • Dow 17,280 (weak) and 17,460 (strong)
  • S&P 2,006 (weak) and 2,027 (strong)
  • Nasdaq 4,608 (weak) and 4,656 (strong) 
  • NYSE 10,560 (weak) and 10,670 (strong) 
  • Russell 1,172.50 (weak) and 1,185 (strong)

China made their own weak bounce overnight and that's already enough to get our Futures back on track but, as you can see from the chart on the left – this morning's bounce to 3,173 erases only 50 points out of a 275-point drop, which just happens to be the very definition of a weak bounce per our 5% Rule™.  

So, to sum it up – we are likely to have strong bounces as traders are relieved to see China having weak bounces and,…
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Happy Martin Luther King Day!

It's Martin Luther King day so the markets are closed.

It's a good day to read his "I Have a Dream" speech – really is amazing when you think of the great social change in this nation that was set in motion by one man with a vision.  Here's a great video of the actual event.

It is a testament to the power and effectiveness of Dr. King's movement that, even to those of us who were alive at the time, it seems like it must have been another world where a man had to speak out against such injustice as if it wasn't obvious to the majority of people that segragation, whether by law or by practice, was an outrage.

Sadly, many of the lessons he taught us have already been forgotten, some great quotes:

  • Nonviolence is a powerful and just weapon. which cuts without wounding and ennobles the man who wields it. It is a sword that heals.
  • Nonviolence means avoiding not only external physical violence but also internal violence of spirit. You not only refuse to shoot a man, but you refuse to hate him.
  • It is not enough to say we must not wage war. It is necessary to love peace and sacrifice for it.
  • The hope of a secure and livable world lies with disciplined nonconformists who are dedicated to justice, peace and brotherhood.
  • Human progress is neither automatic nor inevitable… Every step toward the goal of justice requires sacrifice, suffering, and struggle; the tireless exertions and passionate concern of dedicated individuals.   
  • Never forget that everything Hitler did in Germany was legal.
  • We will remember not the words of our enemies, but the silence of our friends.
  • The past is prophetic in that it asserts loudly that wars are poor chisels for carving out peaceful tomorrows.
  • A nation or civilization that continues to produce soft-minded men purchases its own spiritual death on the installment plan.
  • A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual doom.
  • One of the greatest casualties of


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TGIF – Bringing this Weak Week to a Close

It's been this kind of week

The hits just keep on coming as bad news is suddenly bad news for the markets and even the promise of Draghi waving his money wand next week isn't enough to keep investors in equities.  $4.1Bn flowed out of US-based stock funds according to Lipper while $4.3Bn went into bond funds – driving TLT all the way to $135, where we decided to initiate a short position in our Short-Term Portfolio.   

Our STP finished the day yesterday up 92.5% and we're still very much on the bear side, up 16.6% for the week ($16,600) while the S&P fell 3.3% – AND THAT IS HOW YOU HEDGE!  Yes, our bigger and bullish Long-Term Portfolio lost 1.8%, but that was "only" $8,600 so our net for the week is up $8,000 as our BE THE HOUSE – Not the Gambler strategy continues to pay off for the first two weeks of 2015.

Of course $8,000 a week is $400,000 a year (+66% to our $600K start), so it's not likely that we will be as much on the right side of trades all year as we were this week, but it's a fantastic example of how well our balanced portfolio approach works under extreme market conditions.  We made only a couple of minor adjustments (like adding the TLT shorts) but, for the most part – we don't have to do anything to get that performance when we call the direction right.

Monday is a holiday in the US, so we're certainly not inclined to flip bullish today – or even neutral, for that matter.  All of our weak bounce lines were broken, which is what we feared would happen on Tuesday, when we set them.  Fortunately, our 5% Rule™ prevented us from capitulating during the run-up last week and now we are reaping the rewards on the way down!  

Last Friday, for example, we mentioned that our Members had added $13,000 of TZA longs to our Short-Term Portfolio and TZA has rocketed up from $12.33 (a trade idea we published for free for
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Thursday Freak-Out – Swiss Franc Jumps 20% in One Hour!

Embedded image permalinkHoly Crap!!!  

I'd love to say I'm that good as we were up early this morning (1:54) in our Live Member Chat Room and all seemed quiet with the Futures heading higher and I said to our Members:

Oil hit $50 just after midnight, /NG topped out at $3.37, gasoline at $1.385 and the markets spiked up almost 1%.  India cut their reserve rates 0.25% – a total surprise.  Also, positive notes from China and /NKD is up from 16,600 yesterday to 17,200 just now (and I like /NKD short on that line with tight stops above).

Just two hours later, ALL HELL BROKE LOOSE and the Nikkei dropped 300 points (now more) and those /NKD shorts gained $1,500 in just two hours.  That one was more luck than skill as the Swiss National Bank made a VERY SURPRISING announcement that they were removing their 3+-year currency peg to the Euro and that sent the EUR/CHF pair from the usual 1.20 all the way down to 0.85 before stabilizing at about 1.02, down 20% in minutes!  

Embedded image permalinkNeedless to say, hedge funds who made the very usual, very normal short bet on the Swiss Frank are F'd this morning.  As the Euro had been very weak recently, there were a large amount of short bets on the Franc (CHF) in expectations of the SNB stepping up their Euro-buying program to get back to their usual 1.20 goal.  

But nooooooooooooooooooooo!  They went the other way by 20% and, as I reminded our Members this morning, those wrong way currency contracts (and there are 1M of them on this chart) lose $1,100 PER PENNY move.  That's $22,000 on a 0.20 move in CHF x 1M = $22Bn in losses this morning for currency traders.  Someone is gonna have some 'splainin' to do!  

I already sent out a detailed tweet on the subject earlier this morning, so you can delve further into the subject at your leisure.  For now we should contemplate the…
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Zero Hedge

Teachers' Retirement Funds Are Piling Into Manhattan Real Estate At Record High Prices

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Rather than buying equity interests in buildings, TIAA-CREF and KTCU are seeking to invest in mortgages backed by office towers, retail properties, warehouses and apartments in major U.S. cities. The venture between the two companies, which manage teachers’ savings in their respective countries, is 51 percent owned by TIAA-CREF and 49 percent held by Seoul-based KTCU.

“You invest in a huge office tower in New York because you want a saf...



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Market Shadows

What Would You Do?

What Would You Do?

Courtesy of Paul Price

Suppose you had the technical ability and raw materials to print up counterfeit dollars, euros or yen that were identical to the real things. Assume you could spend them as fast as you could create them with no fear of any repercussions.

Would you prudently print up only as much fresh currency as you needed for your current lifestyle? Would you create just a bit more than that to help relatives or those in need?

It is most likely you’d have your printing press running 24 hours a day, seven days a week. Becoming the richest person in the world would confer great power upon you.

You could rationalize this action because you plan to use the money for good purposes. Imagine the warm feeling you’d get by giving every person in America one million do...



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Phil's Favorites

Why The U.S. Shale Boom May Come To Abrupt End

Courtesy of Arthur Berman via OilPrice.com

U.S tight oil production from shale plays will fall more quickly than most assume.

Why? High decline rates from shale reservoirs is given. The more interesting reasons are the compounding effects of pad drilling on rig count and poorer average well performance with time.

Rig productivity has increased but average well productivity has decreased. Every rig used in pad drilling has approximately three times the impact on the daily production rate as a rig did before pad drilling. At the same time, average well productivity has decreased by about one-third.

This means that production rates will fall at a much higher rate today than during previous periods of falling rig counts.

Most shale wells today are drilled from pads. One rig drills many wells...



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Chart School

Bearish Engulfing Patterns

Courtesy of Declan.

Today's end-of-day losses were disguised by the relatively light declines at the close. Markets opened strong, but were unable to maintain premarket strength. The consolidations in place since the 'Santa Rally' are holding on, but markets can ill afford additional losses from here.

The S&P finished on the 38.2% Fib retracement of the 'Santa Rally'. Aggressive longs may view this as a head-and-shoulder reversal; if this pr-oves to be the case then markets have to rally from the cash open. The S&P is a case in point.


The Nasdaq experienced a very wide day; opening above its 20-day and 50-day MA, but finishing well below these moving averages, and on...

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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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OpTrader

Swing trading portfolio - week of January 26th, 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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Sabrient

Sector Detector: With the Fed fading into shadows, investors look overseas for new catalysts

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

Courtesy of Sabrient Systems and Gradient Analytics

By Scott Martindale

Last week, the S&P 500 put an end to its streak of weekly losses, despite giving back some gains on Friday. Thursday provided the big catalyst, with the ECB’s announcement of its bold new monetary stimulus plan. Investors were cheered and soothed for the moment. And U.S. fundamentals still look strong. But with Greece trying to turn back time, with volatility elevated (and likely to continue as such), and with the technical situation still dicey, the near term outlook is still worrisome.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart...



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Digital Currencies

Jitters After Bitcoin Exchange Suspends Services

So as I was saying yesterday (Bitcoin: The Biggest Clown Show In History?), Bitcoin has several obstacles on the path to potential success as an alternative currency. But I forgot to mention hacking and theft at Bitcoin exchanges and other technical problems. This is related to the lack of government backing and the fact that the value of Bitcoins is based entirely on confidence.  

Jitters After Bitcoin Exchange Suspends Services 

By 



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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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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's this week's Stock World Weekly.

Click here and sign in with your user name and password. 

 

...

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Option Review

SPX Call Spread Eyes Fresh Record Highs By Year End

Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...



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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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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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