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Phil's Newsletter

February’s Fantastic Finish – Everything is Awesome!

Everything is AWESOME!  

The Nasdaq is about to hit 5,000 and AMZN costs over 200 times what it makes in a year and NFLX costs 100 times what it makes and people think that's AWESOME!  After all, Americans love overpaying for things – it makes us feel rich and, if you are part of the investing class, all these inflated stock prices actually help to make us rich – so why complain?  

I complain because it's not a SUSTAINABLE rally.  I LOVE sustainable rallies – this just isn't one of them and that means we have to be much more cautious in taking on additional risk at these levels.  Nonetheless, we've been able to find 10 long plays to add to our Member Portfolios in the past two weeks, which is awesome.

peThis is the chart that bothers me the most.  Earnings can be faked or "managed" quarter to quarter but cash-flow is harder to manipulate and, as you can see, we're breaking new highs when it comes to pricing stocks relative to the amount of real money that actually drops to the bottom line.  

It takes the average company 15 years to generate the money you give them for a share, that's a simple return of 6.7%, which is a damned site better than you can do with with "risk free" bonds (3%) or bank interest (0%) so it's not surprising money keeps pouring into the markets – especially as we have painfully learned in the past cycle that bonds are far from risk-free, right?  

Ici 10 normalSo money can and probably will continue to pour into the markets because, like Richard Gere, it simply has nowhere else to go.  As you can see from this Bloomberg chart, it's that "Fixed Income" retirement money that's driving the flows – take that away and DOWN WE GO! 

As long as interest rates (which are also borrowing rates for our Corporate Masters) are kept artificially low by the Central Banksters, they will continue to force money into the markets but, as we have seen over the past year – we've reached the point of diminishing returns on QE and now (…
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Fixin’ It Thursday – Japan Raids the Pension Fund to Goose Markets

1.21 TRILLION Dollars!  

That's the size of Japan's Pension Investment Fund and, this morning, they raised their allocation for buying domestic stocks from 8% to 25% and that sent the Nikkei (we're short) flying up 200 points, to close at 18,785.  That's theoretically $200Bn additional Dollars that will be buying Japanese equities, so of course the market popped on the news.  But should it have?  

Aside from my minor concern that putting 25% of your pension money into a market that has already popped 30% since October in a country where the rapidly aging population and diminsihing workforce CAN'T AFFORD TO LOSE IT – how about the fact that it was the SAME EXACT ANNOUNCEMENT that popped the Nikkei from 14,529 to 17,520 in October/Novemeber in the first place?  

Fortunately for Japanese Central Banksters, you CAN fool some of the people all of the time and re-announcing $200Bn of mindless equity spending did the trick of popping the Nikkei over the top of their trading range.  Now we'll see if they can break 19,000 (but we're still betting they won't).  Meanwhile let's cheer them on:

Oh Nikkei, you're so fine you're so fine you blow my mindhey Nikkei, hey Nikkei

Oh Nikkei, you're so fine you're so fine you blow my mind, hey Nikkei, hey Nikkei

SPX WEEKLYThat should be good for another 200 points…  Meanwhile, we're running out of ways to talk up the S&P at 2,110, maybe we need to break into that Social Security lock box and put that into the market.  What?  Already taken?  Oh well…  

We had a lot of fun shorting the index Futures yesterday as I made a call in our Live Member Chat Room to short the spike on the Nasdaq (/NQ) at 4,460 (we got burned at 4,450 earlier) and the Russell at 1,236 and we caught a ride down on /NQ to 4,430 for a $600 per contract gain and the Russell fell to 1,228 for a $800 per contract gain.  This morning we got an opportunity to re-short at 1,235 and 4,450…
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Will We Hold It Wednesday – Dow 18,000 Edition

SPY  5  MINUTEWhere's the volume?  

We can't keep running up on no volume and not expect to have a nasty sell-off – that just isn't the way things work.  In yesterday's Live Trading Webinar, we discussed our aggressive hedge adjustments even as the market drove on to even higher highs.  Of course, that's when buying protection is the cheapest but most traders are reactive and not proactive – so we get to bargain shop by acting a bit ahead of the curve.  

Yellen didn't do too much to boost the markets yesterday, but she gets another crack at Congress this morning to refine her statements.  On the whole, she certainly put off expectations of the Fed raising rates until about September and, even then, only if the economy continues to improve – which is a questionable notion at this point (see last week's posts on the economy).  

Still, we've been threading the needle and playing both sides of the market.  At the beginning of the month, for example, while we were still giving out free trade ideas - we gave you a combo play on oil, which was one of our Top Trade Alerts (Members Only) using 10 long USO 2016 12 calls for $5.75 ($5,750) and selling 10 of the 2016 $22 puts for $5.65 ($5,650) for net $100 out of pocket.  Yesterday USO closed at $18.04 and the combo closed at net $2,260 – up $2,160 (2,160%) in less than 3 weeks – you're welcome.  

Of course, that's nothing compared to our more aggressive call to go long on Natural Gas Futures (/NG) at $2.69.  Natural Gas finished the day at $2.90 and, at $100 per penny, per contract, that's a nice $3,100 gain on each contract.  We're done with Natural Gas longs but we still have a substantial interest on USO longs in 3 of our 4 Member Portfolios, though we did just stop out of longs on the Oil Futures (/CL) at $49.50 in this morning's chat ahead of inventories.  

Chinese stocks came back from a week-long holiday (New Year's) and fell off into the close, …
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Tempting Tuesday – Will Yellen Push Us Past 2,200?

Look at those makets go!  

Nasdaq 4,960 – just 40 points to 5,000 after popping up from 4,600 at the beginning of the month.  That will be almost 10% in a month if we pop 5,000 – no wonder no one wants to buy a home or put money in the bank when the stock market spits out 10% monthly gains

This is, Janet will tell you, perfectly normal folks – stock markets always go up at 100% annual rates in economes with no inflation, don't they?  There's nothing wrong with this picture.  Don't worry about where all this money is coming from if the GDP is essentially flat – it's delivered by money fairies and it will never, ever, EVER stop because there is no downside to pumping newly created money into the markets to enrich the investing class – none at all….

JUST IN CASE this turns out to be an unsustainable scam that blows up in people's faces – we do have some hedges in our Short-Term Portfolio and we'll be reviewing those in this afternoon's Live Trading Webinar (1pm EST), so tune in for that.  As I said yesterday, the gains in our bullish, Long-Term Portfolio have gotten so ridiculous that we should cash them out but who wants to cash out when we (the investor class) are getting all this FREE MONEY?  

It's not just Yellen and our Fed, of course.  In fact, in the developed World, our Central Bank is one of the only ones that HASN'T made a surprise easing move this year already.  A lot of people are expecting a nice surprise from Yellen as she addresses Congress today but Congress is getting nervous that perhaps $5,000,000,000,000.00 is a bit too much risk on the Fed's balance sheet already.  

After all – if the Fed ends up taking a loss, it becomes a negative on our Treasury's balance sheet and then our National Budget gets thrown out of whack as the taxpayers get the bill for all the FREE MONEY the Fed has been handing out to the Top 1%.  If that happens near an election, it may not be good for the Republican majority.  Other than that,

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Monday Market Miracle – Everything is Awesome Again

You can't argue with a good chart.

All of our indices are ripping up to new highs and don't let the lack of volume bother you – as it doesn't seem to bother anyone else in the media these days.  Volume in the first half of Q1, so far, has been about half the rate we had in Q1 of last year and Q4 was no better so maybe this is just the new normal – a rally with nobody actually trading.

Just because no one is buying – it doesn't mean you can't mark up the prices, does it?  The only time there is price pressure to the downside is when there is a lot of selling and, so far, no one is selling either – they're just not buying or selling – it's a dead market.  

Corporations are, in fact, the largest purchasers of stock – accounting for 200% (not a misprint) of the net inflows into equities.  Without companies buying back their own stock at record paces, this market would be dropping like a rock attached to an even bigger rock:

Despit buying back incredible amounts of their own stocks, actual Corporate Earnings have dropped 10% since Q3 from a high of $29.84 on the S&P down to less than $27 per share so far for Q4s reports.  4 x $27 divided by 2,100 = 20.20 – that would be an insanely high p/e for the S&P, where 15 is more common ground.  Having a major index that is possibly 33% overvalued is, as they say in Stockholm - not good.  


Of course, it's no surprise that earnings are turning down because data is turning down as well, per the Economic Surprise Index we discussed on Thursday as well as the actual US Macro Index, which also SUCKS!  This is really not the sort of thing you should be sticking your head in the sand over.  If you were driving a car, you would step on the brakes or at least swerve to avoid an obstacle that's clearly in your path – why would you not
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How To Get Rich Slowly

In 2015, is focusing on wealth-building techniques which, combined with our winning investing strategies, can help put you on the path to a life of financial independence.



Fixin’ It Friday – Greece Talks Yet Again

Wheeeee, what a ride!  

As you can see from the chart, Greece has been up and down 10% 4 times in 5 days and last week we gave you a Trade Idea for Greece long using the GREK Feb (expires today) $11/12 bull call spread at 0.50 to make 100% in 5 days (today) if GREK finishes over $12.  

Unfortunately, GREK had a strong open on Thursday and, by the time people could buy it, the spread was 0.60 so, at $12, the gain will only be 66% but those who played the momentum game during the week had several opportunities to engineer a 0.50 spread as the ETF ran up and down the ladder with each new statement by pretty much anyone in Europe with an opinion.  

Our other trade idea from that day, that IYT would fall and the Feb $159 puts at $1.20 would double, however, was off by a mile and IYT tested $165 yesterday before calming down to $163.08 despite the now week-long port strike on the West Coast.  I can't explain that one, other than maybe we were too far ahead of the curve.  If you want to go for it next month, the premise is still valid (our timing was off) and the March $161 puts are now $2 and a trip back to support at $155 would make them $6 – up 200% would take the edge of this week's loss.  

Our CSCO spread we discussed that day is up the 4,000% we expected and our UNG March $13/14 bull call spread is on track for a 100% gain so all is not lost.  These are your last free trade ideas for the quarter – so try to enjoy them!  If you want more trade ideas, you can join us here like our new Member, Verreaul recently did (and thanks for the kind words!):

I have been reading the "free" PSW for about a year and have always liked Phil's style as it closely resembled the way I like to trade (mostly naked put options). I have been a paid subscriber for about 5 weeks and I have been learning a lot from Phil

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Falling Thursday – Greece Unfixed and SURPRISE – The Economy Sucks

What a great morning we're having!

We were having a discussion in our Live Member Chat Room this morning about why we were staying short-term bearish despite the low-volume rally of the last few days when the market began to spike higher, so I immediately put out a note to our Members saying:

Wow, Futures flying straight up now, about 0.3% the other way now – nice morning swing.  /NQ testing 4,400 for a fun short with tight stops and /ES 2,099.50 and /YM 18,030 (no short above 18,000) and /TF 1,230.  As long as /TF and either /ES or /NQ are below their lines – I'm for shorting any of those 3.  

The Russell hit 1,222 (up $700 per contract) and the S&P hit 2,091 (up $425 per contract) and the Dow paid $250 at 17,950 – so the Egg McMuffins are paid for and we can start our trading day.  

Of course that's nothing compared to the Trade Idea we gave you yesterday morning (and these newsletters come to you pre-market, every day by SUBSCRIBING HERE) to short Oil Futures (/CLJ5) at $53.50, which are up $3,000 PER CONTRACT this morning at $50.50.  That's not bad for a day's work and it keeps our hourly profit rate well over $500 for the day (we had a good start yesterday morning too). 

What gave us a quick round-trip this morning was, of coruse, yet another Greece fire.  This time it was Germany saying "Nein!" to giving Greece a 6-month loan extension saying Greece's proposal was "not substantial" – meaning it didn't guarantee the Banksters who really run the Government would get paid.  "In its rejection, Germany argued that the Greek request doesn't meet the bailout requirements and said the proposal only aims at getting bridging financing without fulfilling its commitments."  

I know this may come as a shock to the EU Banksters but, when you lend money to someone at 10-20% interest rates, which they have to pay because you have rated them a terrible credit risk – THE RISK IS THAT THEY CAN'T PAY YOU BACK!  What's going on
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Which Way Wednesday – 2,100 and Bust?

SPY  5  MINUTEYay, S&P 2,100!  Now what?

As we predicted yesterday morning, nothing was going to stop the S&P from banging up to that 2,100 line.  Not for lack of trying, either as we had a 22% decline in the Empire State Manufacturing Index and a 2% decline in the Housing Market Index but none of that matters because Greece is going to be fixed again so the markets flew higher – albeit only at the last minute on no volume.  Still – it's a pretty picture, isn't it?.

We demonstrated the idiocy of the markets yesterday for our Members in our Live Webinar by scaling into a short position on March Oil Futures (/CLH5), which ran up while we were doing a demonstration on scaling in.  We decided to stay short overnight and, this morning, we were rewarded with a $4,000 gain.  Now we've flipped to the April Futures (/CLJ5) in our Live Member Chat Room, which we're shorting at $53.50 in anticipation of another nice dip today.  

Of course we told you, right in yesterday's morning post (which you can have delivered to you pre-market daily by clicking here) that we were shorting oil at $53.50 and they fell all the way to $51 at 10 am, for a lovely $2,500 per contract gain.  By all means though – SAVE your money and DON'T subscribe to the newsletter – I'm sure everyone you read gives you trade ideas that make $2,500 per contract in 95 minutes, so there's no need to read our little ideas.  

Of course, $2,500 per contract is nothing compared to Premium Articles, like our "Secret Santa's Inflation Hedges for 2015," which had 4 great trade ideas, two of which are still playable but XHB (Home Builder ETF) isn't, as the 20 2016 $28 puts we sold for $2.25 ($4,500) on 12/21 are already down to 0.70 ($1,400), for a very nice 68.8% gain in just 2 months ($3,100) good thing you didn't waste money on a subscription in December, right?  

We were more aggressive than that though, as we suggested pairing it with 20 of the 2016 $28/33 bull call spreads at $3.30 ($6,600) for a net $2,100 outlay on the spread.
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2,100 Tuesday – S&P Tests Along with Nasdaq 5,000

Holy cow, look at those indexes go!  

With the NYSE finally above our Must Hold line at 11,000 – it may be time to give up on our bearish positions and just "go with the flow" BUT we still have S&P 1,100 and Nasdaq 5,000 to punch through and THEN we can use them as stop lines for more bullish betting.  

Not that we haven't made plenty of bullish bets.  Our Long-Term Portfolio closed Friday up a whopping 31.4% with $156,886 in gains over the past 14 months.  Of course our Long-Term Portfolio is ALL bullish – it's our Short-Term Portfolio that holds our hedges but, fortunately, we also make some nice short-term bullish bets in there as well and that portfolio is up 103.1% since 11/26/13 – a gain of $103,065 off our original $100,000 virtual investment.  

We made some aggressive bearish adjustments to the STP on Friday as we anticipated a sell-off after the holidays but, so far – despite Greece being broken again this morning – we're still holding up in the Futures.  We did, however, manage to scratch out some Egg McMuffin money this morning in our Live Member Chat Room, picking up oil shorts (/CL) early at $53.50.  We just (7:35) exited a round at $52.75 for a $750 per contract gain to start our day.  

SPX WEEKLYNot that it's easy money, by the way:  We initiated that trade at 4:57 am and it took two and a half hours to make that $750 (and we took entries and exits in between) so certainly this kind of labor isn't for everyone at $250/hr.  We also laid out some nice index shorts for our Members, so hopefully we can give ourselves a raise over the course of the day.  

Of course, Futures trading is just what we do for fun while we're waiting to see if our Long-Term trades work out.  After all, it's taken 14 months to make 31.4% in our LTP – we have to find a hobby to keep us from over-trading our Long-Term positions, right?  

As GMO noted in their White Paper this weekend, skill (as in investing skill) may be
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Zero Hedge

David Stockman Warns "It's One Of The Scariest Moments In History"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

"The Fed is out of control," exclaims David Stockman - perhaps best known for architecting Reagan's economic turnaround known as 'Morning in America' - adding that "people don't want to hear the reality and the truth that we're facing." The following discussion, with Harry Dent, outlines their perspectives on the looming collapse of free market prosperity and the desctruction of American wealth as policymakers "take our economy in a direction that is dangerous, that is not sustainable, and is likely to fully undermine everything that's been built up and created by ...

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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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Chart School

World Markets Update: The Rally Continues with a Strong Eurozone Skew

Courtesy of Doug Short.

Five of the eight indexes on my world market watch list posted weekly gains, with Germany's DAX as the top performer, up 3.18%. Japan's Nikkei and France's CAC 40 were in a near dead heat for second place with China's Shanghai Composite not far behind after emerging from its long Lunar New Year break. Hong Kong's Hang Send and India's SENSEX finished the week a hair below flat. The US's S&P 500 was the weakling of the bunch with its 0.27% loss.

Here is an overlay of the eight for a sense of their comparative performance so far in 2015.

Here is a table of the 2015 data performance, sorted from high to low, along with the interim highs for the eight indexes. All eight indexes are in the green, with the two Eurozone indexes up nearly 16 percent.

A Closer Look at the Last Four Weeks


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Phil's Favorites

In Memory of Spock: Live Long and Prosper; Is He or Isn't He? Fish Tomatoes, Hand Transplants, Sci-Fi vs. Reality

Courtesy of Mish.

One of my favorite characters in TV history was Star Trek's "Spock". Yesterday, Leonard Nimoy, Spock of ‘Star Trek,’ Died at 83.
Leonard Nimoy, the sonorous, gaunt-faced actor who won a worshipful global following as Mr. Spock, the resolutely logical human-alien first officer of the Starship Enterprise in the television and movie juggernaut “Star Trek,” died on Friday morning at his home in the Bel Air section of Los Angeles. He was 83.

His wife, Susan Bay Nimoy, confirmed his death, saying the cause was end-stage chronic obstructive pulmonary disease.

Mr. Nimoy announced last year that he had the disease, attributing it to years of smoking, a habit he had given up three decades earlie...

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Market Shadows

Kimble Charts: Coal

Kimble Charts: Coal

By Ilene 

Chris Kimble's chart for KOL shows a recently beaten down ETF struggling to pull itself up from the ashes. As the chart shows, KOL has recently drifted down to levels not seen since the financial crisis of 2008-9.

Bouncing or recovering with energy in general, coal prices appear to have stabilized in the short-term. Reflecting coal prices, KOL has traded between $13.45 and $19.75 during the past year. Bouncing from lows, KOL traded around 2% higher yesterday from $14.26 to $14.48 on high volume. It traded another 3.6% higher in after hours to $15, possibly related to ...

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Swing trading portfolio - week of February 23rd, 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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Sector Detector: Sector rankings stay neutral with few bullish catalysts on horizon

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

Courtesy of Sabrient Systems and Gradient Analytics

Stocks are hitting new highs across the board, even though earnings reports have been somewhat disappointing. Actually, to be more precise, Q4 results have been pretty good, but it is forward guidance that has been cautious and/or cloudy as sales into overseas markets are expected to suffer due to strength in the US dollar. Healthcare and Telecom have put in the best results overall, while of course Energy has been the weakling. Still, overall year-over-year earnings growth for the S&P 500 during 2015 is expected to be about +8%.

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

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Digital Currencies

MyCoin Exchange Disappears with Up To $387 Million, Reports Claim

Follow up from yesterday's Just the latest Bitcoin scam.

Hong Kong's MyCoin Disappears With Up To $387 Million, Reports Claim By  

Reports are emerging from Hong Kong that local bitcoin exchange MyCoin has shut its doors, taking with it possibly as much as HK$3bn ($386.9m) in investor funds.

If true, the supposed losses are a staggering amount, although this estimate is based on the company's own earlier claims that it served 3,000 clients who had invested HK$1m ($129,000) each.


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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 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 with any questions.

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

Thank you for you time!

FeedTheBull - Top Stock market and Finance Sites

About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

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

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