Phil's Newsletter

TGIF – Yesterday’s Fake GDP Number Allow Windows to Be Dressed

Oops, sorry, I'm not supposed to do this.  

Sometimes we know things in advance and we are not allowed to talk about them until the data is release and Personal Income and Spending reports don't come out until 8:30 but we already know Personal Income and Spending are heading lower, not higher as expected, because it's right in yesterday's GDP Report, which shows Real Annualized Per Capita Disposable Income at $37,843, which is down $3 from the last estimate, not up at all.

Overall Gross Domestic Income (GDI), which includes our Corporate Masters, increased just 0.6% in the 2nd quarter, compared to 0.4% in the first half.  This does not seem like the kind of number that would lead us to have a MASSIVE upward revision in GDP – from 2.3% to 3.7% in the second estimate and up 3.1% (400%) from Q1's anemic 0.6% growth rate.  

Category Q2 Q1 Q4 Q3 Q2
GDP 3.7% 0.6% 2.1% 4.3% 4.6%


continue reading





Shanghai Surprise Pops China 5% – Is Everything Awesome Again?

Embedded image permalinkWheeee, what a ride!  

From a new low at 2,920 (down 42%) all the way back to 3,083 in 45 minutes was the close of the Shanghai Composite this morning as China’s government resumed its intervention in the stock market this morning.  China had halted its stock-market intervention in the first two days of this week as policy makers debated the merits of an unprecedented rescue, according to people familiar with the situation.

Even though the move was clearly fake, Fake, FAKE, it was still enough to excite investors as Asian and European markets followed China's lead higher and now EVERYTHING IS AWESOME again and the US Futures are up another 1% on top of yesterday's spectacular move.  

While we were looking for a bounce off Tuesday's drop back to test 1,950 on the S&P 500, this is not the way we like to make our Strong Bounce lines (faked with stimulus and loose money talk).  Still, fake or not, we'll take it as it only enhances our performance.  In yesterday's post, we had long trade ideas for Apple (AAPL), which popped 5.75%, Baker Hughes (BHI), which popped 3% and Sotheby's (BID), which gained 1%.  

We discussed our 5% Rule and our bounce lines yesterday on BNN's Money Talk and it's a real black swan event for me to spend 10 minutes talking technicals, so you might want to watch it.   Meanwhile, the Russell hit our weak bounce line EXACTLY and the Nasdaq hit our strong bounce line EXACTLY with the Dow and the S&P in between and the NYSE woefully short – indicating this rally hasn't been to broad-based.  

  • Dow 16,200 (weak) and 16,650 (strong) 
  • S&P 1,900 (weak) and 1,950 (strong) 


continue reading





US Markets Race China to the Bottom – Can we Avoid their Fate?

There's no question about it, China is a disaster.  

Though officially down "just" 1.3% for the day, the Shanghai Composite fell 3% into the close, once again failing the 3,000 line, which is 42% off the June highs, just 60 days ago.  We knew China was going to collapse, that was never in doubt.  In fact, in our June Trade Review, my comment to our Members was:

I don't want to be overly dramatic about this stuff (and we are short on both China and Japan through FXI ($51.85) and EWJ ($13.26) as well as short the US markets as full disclosure) but I'm not going to let my people go through what people went through in 2008 if I can help it. If you remember, it was a very slow roll to collapse while the markets made record highs in 2007/8 as well.

FXI topped out just over $52 and is now $35, down 32.6% and Japan's EWJ bottomed out at $11.25 yesterday, down 11% over the same period.  Our own markets only just begun selling off last week but are catching up fast with the S&P falling from 2,100 to our 1,850 target, a 12% decline in very short order.   The Nasdaq, however, completed a 22.50% drop yesterday, briefly making a red box on our Big Chart for the first time since last October:

 We need to keep a close eye on Japan, who are a lot closer to China than we are (geographically and economically).  If they are able to hold up in the face of China's collapse, we should be able to as well.  Keep in mind (see that review) that my expectations for a 10% correction in the US markets was BECAUSE we thought China would collapse – so this is very much in-line with our expectations.  

SPX WEEKLYHOWEVER, now we have to worry about all the traders who didn't see this thing coming from a mile away and have been caught with their pants down on this sell-off.  Just because we were prepared for it and
continue reading





Yesterday’s Trade Ideas Are Up $18,400 – Today it’s 3% Index Gains or Bust!

We need 3% gains today.  

That's right, after dropping 15% our 5% Rule™ says a weak bounce should be 20% of the drop and that's a 3% bounce off yesterday's close just to keep us a tiny bit bullish and, thanks to China's expected market save (more on that later), we're getting it pre-market.  We already played for these bounces, of course – as I noted in yesterday's morning post, we wanted to go long in the Futures at:

  • Dow 15,840 (/YM), now 16,320 - up $2,400 per contact 
  • S&P 1,850 (/ES), now 1,946 - up $4,800 per contract 
  • Nasdaq 4,000 (/NQ), now 4,200 - up $4,000 per contract 
  • Russell 1,080 (/TF), now 1,152 - up $7,200 per contract  

That's $18,400 (per contract) in gains from our suggestions in yesterday's morning post.  Whatever you do DO NOT SUBSCRIBE HERE or you will get useful information like that sent to you pre-market every day.  Of course, those gains are nothing compared to the shorts we abandoned at the same levels from last week's Live Trading Webinar, where we featured a short on the Dow Futures at 17,477 which were up $8,185 per contract at our target low of 15,840.

I was the first person to hash-tag #BlackMonday (which trended), tweeting it out at 5:05 am, long before the Futures fell off a cliff.  We expected the sell-off due to lack of China intervention and, by the time I was writing the 8:20 post, we did a very good job of calling the bottoms but, at 9:42, in our Live Member Chat Room, I said:

I think this is almost a flash-crash.  Someone (thing) is selling with abandon.  I think since we wanted to grab a long, we should and I nominate Dow at 15,600, which is more than 10% down for at least a bounce and the DIA Sept $155s at $6.75 were $13 on Friday and I like them for a gamble with the intention of selling the $159s for $6 on a bounce (now $5.20) so 20 of those for the 5% Portfolio with a stop at $6 or if the Dow can't hold 15,600. 


continue reading





Black Monday for the Markets – China Fails to Hold the Line

People are starting to FREAK OUT!  

It's been so long since we've had a good old-fashioned market correction that many "investors" think the World is ending and are selling everything that isn't nailed down.  Of course, in some cases they are right – especially if they are the kind of momentum chasers who piled into Netflix (NFLX) at over 250 times earnings or Tesla (TSLA) about the same or Amazon (AMZN) at 100 time earnings as they looked to carnival barkers like Cramer and Co. to hit the noisemakers and tell them how wise they were for following all the lemmings off a cliff.  

Skip to the last four minutes of this interview from last Wednesday Morning, where I explain why Netflix was our top choice for a short, now 25% ago and I also called for a 10% market correction, now (including the morning's futures) 8% ago.  That morning, we were also shorting the Dow Futures (/YM), which were at 17,000, Russell Futures (/TF) at 1,205 and Nasdaq Futures (/TF) at 4,525 using the strategies we had discussed at the end of July in: "Using Stock Futures to Hedge Against Market Corrections."

Aside from the Dow contracts now up $5,500 at 15,900, Russell contracts gaining $8,500 at 1,120 and Nasdaq Futures gaining $10,500 at 4,000, we also suggested bullish play on gold that has already jumped 30% in two weeks.  Even in this downturn, I was able to point out to our Members early this morning that there was a good entry on Gasoline Futures at $1.33 on the /RBV5 contracts (Sept) and we're already back at $1.345 for a $650 per contract gain.

As noted in "Using Futures..", there are ALWAYS opportunities to pick up nice gains in the Futures market, no matter which way things are going.  I also sent out an alert to our Members with Technical Analysis of the current market conditions and you can see it on Twitter (our 5:05 am tweet) if you'd like – as I won't rehash it here other than to say our expected 10% correction is right on track. 

Looking over at our Big Chart, 1,942.50 is where we think the S&P will settle out but
continue reading





PSW August Portfolio Review – Members Only

$19,700!  

That's how much our Short-Term Portfolio gained on Friday during the market drop.  During the session, we cashed out some of our winning hedges and added a few more conservative positions into the weekend – just in case China comes through with stimulus and pops the market.  

That brought our cash position up from $255,000, at noted in the morning post, to $318,000.  In other words, we cashed out $62,975 worth of winning positions – WHILE THEY WERE WINNING – this is something I work very hard to teach our Members, the forgotten skill of taking profits off the table!  

As we calculated in Member Chat, we still had $45,000 of in-the-money protection after we cashed out the naked portions of our SDS, SQQQ and TZA hedges at 11:15.  Then, later in the day, we didn't like the way the market looked so we added bull call spreads on SDS and SQQQ after noting that the S&P and the Nasdaq still had a lot further to fall if this is a proper correction.  

What's the most important take-away here?  WE CHANGED OUR MIND!   We followed our Rule #1 and ALWAYS sold into the initial excitement because we got a good drop in the morning and we didn't want it to reverse on us.  Then, once the bounces were weak and we began breaking down again – we simply bought another SDS position and more SQQQs.  

A lot of traders are "embarrassed" to make a decision and then, even if they feel it was a mistake, to go back and re-buy the position – especially when they have to call a broker and "admit" they changed their mind.  That's a huge problem because even the best traders are wrong 40% of the time and sticking to wrong decisions does not make you a better trader (trust me, I've tried!).  

We take pokes at Futures entries all the time and rarely with conviction because we're only guessing where support will be and, if it fails – the quicker we CHANGE our minds the better!  Again, this is one of the reasons that learning to trade the Futures can make you a much better trader
continue reading





China’s 11% Weekly Drop Finally Wakes the Sleeping Bears

Embedded image permalinkHow many times have I told you so?  

Remember, I can only tell you what is going to happen and how to make money trading it – that is the extent of my powers.  Yes, if you make me dictator for life, heads will roll (literally) and I could get this mess straightened out but, if you continue to elect the idiots you've been electing – all we can do is sit on the sidelines and make money trading against their incompentency.  

Our bearish Short-Term Portfolio, for example, was up 124.5% at 1pm, when we reviewed it in our Live Member Chat Room (you can join the fun right here) but finished the day up 136.2%?, gaining $12,000 in just 3 hours as the market continued to fall!  Why were we so bearish that a stock market crash gives us one of our best days of the year?  Because we pay attention to the stuff I wrote about above!  

Yes, as fundamental investors we are often a bit too far ahead of the curve and we failed to participate in the last legs of the great China rally because we already
continue reading





S&P Faces Critical Test at 2,060 – Will China Save Us?

SPX DAILYHere we go again!  

The S&P Futures are re-testing that 2,060 level, which is 20 points below the 200-day moving average and, more importantly, 35 points below the 50 dma, which means, if we finish down here, we can drag the 50 dma almost a full point lower and a few days like that can bend the line down and then we're heading into our 3rd major death cross sometime around the end of September.  

That's why we look for strong bounce lines off these critical support levels – if we don't get the bounces, the shape of the charts will change and that will turn sentiment more bearish and make it all the much harder for the indexes to rally in the Future.   All this is taken into account by our fabulous 5% Rule™ which, as you can see from yesterday's Big Chart – has really been driving the market lately.  

Last week, we discussed our outlook for the S&P by examining some of the major components and contemplating whether or not they could drive the market any higher and we concluded that Exxon (XOM) and Chevron (CVX) would be a drag on the S&P and the Dow with oil at $43.  A week later, oil is at $41 (we went long at $40.65 this morning in our Live Member Chat Room) and both companies have had a TERRIBLE week, with XOM down 2.75% and CVX down 5.75% (about the same as oil itself), both costing the S&P and the Dow heavily.  

Of course, we told you this would happen last Thursday, so don't act all shocked about it this morning.  In fact, yesterday's morning post called the action in the headline ("Whipsaw Wednesday – Monday Market Gains Gone in a Flash (Crash?)") and you can have those posts delivered to you pre-market, every day, by signing up right here.  

SPX WEEKLYLast week, the conclusion of our two-part study on the S&P was:

So, upon further examination, there is no change to our stance of being short the markets


continue reading





Whipsaw Wednesday – Monday Market Gains Gone in a Flash (Crash?)

RUT WEEKLYLOL, what a joke!  

Unfortunately, the joke is on us as Monday's silly low-volume rally has already been completely erased in this morning's Futures, which is fantastic news for people who joined us for yesterday's FREE Live Trading Webinar (replay availabe here), where we shorted the Dow Futures (/YM) at 17,477 and overnight we got a drop back below 17,000 for a $385 per contract overnight gain.

Futures trading is NOT complicated – it's actually more straightforward than options trading as you simply pick a spot on the chart and say "I think the index will go above or below that line."  The trick is getting the above or below part right but the rest is just placing a bet and crossing your fingers.  We do live webinars every Tuesday at 1pm and often teach Futures trading as it's a wonderful way to make quick adjustments to your portfolio (see "Using Stock Futures to Hedge Against Market Corrections").

In our Live Member Chat Room, we also picked up Russell Futures (/TF) short at 1,220 at the market open and there we caught a nice ride down to 1,205 for a $1,500 per contract gain.  On the S&P Futures (/ES) our line was 2,092.50 and those paid $50 per point down to 2,084.50, which is +$400 per contract and the Nasdaq Futures (/NQ) fell from our 4,545 line back to 4,525 and that was good for a $1,000 per contract gain.  

Aside from being a really fun way to pick up some extra money in an otherwise dull trading day, Futures can be very valuable hedges and they are not just used by traders but by companies as well.  In fact, despite oil averaging below $50 this year, many oil companies are getting far more than that because they sold their oil on the Futures markets at much higher prices:

That has somewhat shielded them from falling oil prices (oil averaged $85 last year) but now those hedges are running out and oil is still down below $43 (we're long) and you know these companies don't want to lock in that price but what if it goes even lower?  The next earnings cycle is early November for
continue reading





If China Drops 6% and no One Reports it, Does it Matter?

Embedded image permalinkThe Shanghai Composite fell 6.12% today (again). 

If this is the first place you're hearing about it, that's very sad and very scary because it should be the screaming headlines as China is our largest trading parner and the second-largest economy on Earth and those of us who invest in the Global Marketplace (and yes, that includes America!) should care very much what happens in China.

Since the last time China fell 6% in a day (which is a neat trick since they halt stocks that fall 10% so most of the stocks were halted to get that average), which was only 3 weeks ago, China has taken extraordinary measures to prop up the market yet they are already failing and once again we are rapidly approaching another test of the 200-day moving average, below which there is no real support for another 20% drop and even that will be tenuous at best as the Shanghai is still 100% higher than it was last summer – for no particularly good reason.  

Embedded image permalinkIn fact, looking at China's PMI Report, it's amazing that the markets are holding up so well as we spiral back to low levels of production not seen since 2008/9.  It's not just China, of course.  Globally, the average PMI reading in July was 51, just one point into expansion (or one point away from contraction, if you are a glass half-empty type) and, unfortunately, I have to remind you that the PMI is an OPINION report – in the US, it's a survey of just 400 Purchasing Managers and how they THINK the next 6 months are looking.  

Like any 400 out of 40,000 people who actually agree to be surveyed (margin of error is +/- 4.88), their OPINIONS may not represent the broader population and may have no relation whatsoever to what's actually going on.   After all, purchasing managers are members of the top 10% who have good jobs with good salaries and are bound to be more optimistic than the average person who has to work for a living and has no time to answer surveys.  


continue reading





 
 
 

Phil's Favorites

Phil's Stock World Trading Webinar 8-25-15

This week's major topics: 5% Rule, Short-term and Butterfly Portfolios, Trade Ideas, MSFT, NASDAQ, SPX, S&P, AMZN, WMT, BBY, AAPL, China, and Global Implications

Subscribe to The Phil's Stock World YouTube Channel here.

  • 00:00 Disclosure
  • 2:40 Butterfly portfolio, review positions, MSFT, WMT trade ideas
  • 17:28 Hedges
  • 24:50 Short-term portfolio, review positions, hedging
  • 35:00 NASDAQ, AAPL, S&P, AMZN, WMT, McDonald's, Uber trade Ideas
  • 58:00 MSFT, IBM, HP, trade ideas
  • 1:09:20 Hedge SPX trade ideas, review positions
  • 1:21:15 BBY, AMZN, AAPL, trade ideas ...


more from Ilene

Zero Hedge

Dis-Integrating America

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Pat Buchanan via Buchanan.org,

The Wednesday morning murders of 24-year-old Roanoke TV reporter Alison Parker and cameraman Adam Ward, 27, were a racist atrocity, a hate crime. Were they not white, they would be alive today.

Their killer, Vester L. Flanagan II, said as much in his farewell screed. He ordered his murder weapon, he said, two days after the slaughter of nine congregants at the African-American AME church in Charleston, South Carolina.

“What sent me over the top was the church shooting,” said Flanagan.

To be sure, racism does not fully explain why Flanagan, fired from that sa...



more from Tyler

Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

After all that, the stock market finished the week higher (Business Insider)

The stock market had a wild ride this week. And it ultimately ended up even better than it started. 

This week we saw a 1,000 point drop in the Dow in minutes, another drop of around 600 points in an hour of trading, and another day that saw one of the largest single-day point gains for the Dow in history.

Worried about your investments? Here’s the best advice (Market Watch)

The market is on a ...



more from Paul

Chart School

Gann Angles advise which stocks should be in your portfolio

Courtesy of Read the Ticker.

Gann Angles are great for stock selection, the momentum trader, and judging corrections.

Here is a winning stock, Gann Angle 4x1 is holding the trend of PriceLine. Amazing trend!

Other stocks in this 7 year bull market like AAPL and SBUX have had great Gann angle supporting trends.

Click for popup. Clear your browser cache if image is not showing.



NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net

Investing Quote...

...“Stocks create their own field of action and power; power to attract and repel,which principle explains why certain stocks at times lead the market...



more from Chart School

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...

more from David

Kimble Charting Solutions

Dangerous Place for a kiss of resistance, says Joe

Courtesy of Chris Kimble.

Anyone noticed its been a wild week? Has anything been proven with all the volatility the past 5-days?

What happens at (1) below, could tell us a good deal about what type of damage did or didn’t take place this week!

CLICK ON CHART TO ENLARGE

The large decline on Monday cause the S&P 500 to break support of this rising channel.

The mid-week rally pushed the S&P higher and as of this morning it is kissing the underside of old support as resistance now, near the 50% retracement level of the large decline over the past few weeks.

Why could th...



more from Kimble C.S.

Sabrient

Sector Detector: Finally, market capitulation gives bulls a real test of conviction, plus perhaps a buying opportunity

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

Courtesy of Sabrient Systems and Gradient Analytics

The dark veil around China is creating a little too much uncertainty for investors, with the usual fear mongers piling on and sending the vast buy-the-dip crowd running for the sidelines until the smoke clears. Furthermore, Sabrient’s fundamentals-based SectorCast rankings have been flashing near-term defensive signals. The end result is a long overdue capitulation event that has left no market segment unscathed in its mass carnage. The historically long technical consolidation finally came to the point of having to break one way or the other, and it decided to break hard to the downside, actually testing the lows from last ...



more from Sabrient

OpTrader

Swing trading portfolio - week of August 24th, 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 ...



more from OpTrader

ValueWalk

Some Hedge Funds "Hedged" During Stock Market Sell Off, Others Not As Risk Focused

By Mark Melin. Originally published at ValueWalk.

With the VIX index jumping 120 percent on a weekly basis, the most in its history, and with the index measuring volatility or "fear" up near 47 percent on the day, one might think professional investors might be concerned. While the sell off did surprise some, certain hedge fund managers have started to dip their toes in the water to buy stocks they have on their accumulation list, while other algorithmic strategies are actually prospering in this volatile but generally consistently trending market.

Stock market sell off surprises some while others were prepared and are hedged prospering

While so...



more from ValueWalk

Digital Currencies

Bitcoin Battered After "Governance Coup"

Courtesy of ZeroHedge. View original post here.

Naysyers are warning that the recent plunge in Bitcoin prices - from almost $318 at its peak during the Greek crisis, to $221 yesterday - is due to growing power struggle over the future of the cryptocurrency that is dividing its lead developers. On Saturday, a rival version of the current software was released by two bitcoin big guns. As Reuters reports, Bitcoin XT would increase the block size to 8 megabytes enabling more transactions to be processed every second. Those who oppose Bitcoin XT say the bigger block size jeopardizes the vision of a decentralized payments system that bitcoin is built on with some believing ...



more from Bitcoin

Pharmboy

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 ...



more from Pharmboy

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...



more from M.T.M.

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...

more from Promotions

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!




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...

Learn more About Phil >>


As Seen On:




About Ilene:

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

Market Shadows >>