Phil's Newsletter

TGIF – Gold Flies Higher as Kushner Goes “Under Scrutiny” in Russia Probe

Image result for trump russia tiesThis is gettting interesting, isn't it?  

Jared Kushner, Trump's son-in-law, is now a "person of interest" in the FBI investigation into the Trump Administration's Russia ties.  That doesn't mean he's guilty but it does mean the investigation has moved closer to the President – to the guy married to his daughter, in fact.   The records of records of both Manafort and Flynn have been demanded by grand jury subpoenas, NBC News has reported.  

Kushner has already admited to meeting with Sergey Gorkov, who is the Chairman of VneshEconomBank, a Russian government-owned institution that has been under U.S. sanctions since July 2014.  Gorkov studied at the training school for the FSB, one of Russia's intelligence services.  To be fair to Kushner, you can't be part of Trump's Team and NOT have met with Russians – they are EVERYWHERE!  

Meanwhile, why are you here?  It's the Friday before a 3-day weekend, we didn't become investors so we could work every day, did we?  Go have some fun – I'm already on vacation, writing from my hotel room like a sensible fellow.  

Yesterday's big story was the collapse of oil after the OPEC meeting.  Despite extending the existing production cuts for 9 more month, the cartel failed to increase them and, since the current cuts have barely been effective and since the US production is already filling the gap and putting us back in a glut – a lot of oil longs finally gave up hope and bailed out, leading to a whopping 5% Rule™ correction on the day.

We're long here ($48.50) on the Oil Futures (/CL) as well as the Oil ETF (USO) at $10 as we are only just starting summer driving season and the July 4th holiday gives us another opportunity to see some gains in the coming month.  We may fall another $1 first, to $47.50 because Brent Crude (/BZ) is still at $51 and $50 is better support for them and $47.50 is better support for us but I would hate to miss the rally, so I'd rather get started now.  Gasoline (/RB) is also a good buy at $1.60.

In


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Federally Fueled Thursday – WTF?

The Futures went flying this morning.

Apparently, after having a strong day in the US yesterday and despite the Fed minutes that indicated imminent tightening, China decided to stick it in Moody's eye by strengthening the Yuan to boost their own markets.  The move drove the Shanghai Composite 1.4% higher for the day while the Hang Seng gained 0.77% and the subsequent plunge in the Dollar, to 96.80, goosed our own stock Futures to even higher highs

We're long on the Dollar (/DX) down here and we also have Dollar ETF (UUP) June $25 calls, now 0.24 with UUP at $25.08 as we think there are still strong odds the Fed tightens at their June 14th meeting.  We went over the minutes of the last meeting in yesterday's Live Trading Webinar and noted that the Fed was waiting for evidence that an "economic slowdown is transitory" since May 2nd and, since then, we've had generally bullish data that indicates the Fed will go ahead with the next phase of tightening sooner rather than later. 

Federal funds rate history and recessions.png

Goldman Sachs (GS) agrees with us and pegs the likelihood of a June hike at 80% with another rate hike in September, followed by the announcement of balance sheet normalization at the December meeting and possibly another hike there though I think they'll be more likely to hike on Nov 1st if the markets take the Sept hike well.  Citibank agrees with me there, saying:  "The fact that operational details are closer to being specified shows that the FOMC could be ready to announce tapering of its balance sheet earlier than previously expected. This increases the risk of a September announcement relative to our current view for an announcement in December."

The chart above is not complicated, Fed tightening ALWAYS leads to recession (grey lines) and recessions are rarely more than 10 years apart.  The markets are very likely enjoying their last harrah at the top but my advice is to SELL IN MAY (get back to CASH!!!) and go away until we have a proper correction.  Our Member Portfolios are roughly 80% CASH!!! (have I mentioned how much I like CASH!!! lately?) and we are very,…
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Will We Hold It Wednesday – Fed Minutes Edition

And here we are, yet again.

2,399.50 was the top for the S&P Futures (/ES) yesterday at noon so it's game on for our shorts as well as Russell (/TF) 1,380 and both are still hanging around those levels this morning.  As I said yesterday (and the 4 Tuesdays before that), we'll keep shorting at the top until it stops working.  Seems like a sensible plan, right?  

We're even more excited about our China Ultra-Shorts (FXP), which we've been tracking since April 3rd and currently, in our Options Opportunity Portfolio, we have 10 June $24 calls we paid $2 ($2,000) for on 5/15 after netting a $650 loss on our original spread so we're in for net $2,650 but FINALLY someone besides me has noticed how out of control China's debt situation is becoming as Moody's hits the Middle Kingdom with its first credit rating cut since 1989, saying that the outlook for the country’s financial strength will worsen, with debt rising and economic growth slowing.

"The downgrade reflects Moody's expectation that China's financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows. While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government.

"More broadly, we forecast that economy-wide debt of the government, households and non-financial corporates will continue to rise, from 256% of GDP at the end of last year according to the Institute of International Finance. This is consistent with the gradual approach to deleveraging being taken by the Chinese authorities and will happen because economic activity is largely financed by debt in the absence of a sizeable equity market and sufficiently large surpluses in the corporate and government sectors. While such debt levels are not uncommon in highly-rated countries, they tend to be seen in countries which have much higher per capita incomes, deeper financial markets and stronger institutions than China's, features which enhance debt-servicing capacity and reduce the risk of contagion in the event of a negative shock."

Isn't that exactly what I've been…
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Terrible Tuesday – Children Murdered, Markets Make All-Time Highs

22 dead and 56 injured.  

For those who don't have teenagers, Ariana Grande is a former Disney Star who has a very wide appeal with young kids and about 2M people have seen her recent tour.  There's almost no one in the World with high-school children or grandchildren who can't imagine their kids standing next to the terrorist when the bomb went off at the concert.

Yet the machines that move the markets are mindlessly oblivious to the danger and, as it is Tuesday, they are pushing the S&P back to 2,400, which is fine for us as we predicted this, waited for it and now we'll make money shorting the S&P Futures (/ES) for the 5th week in a row:

The fact that the S&P STILL can't get over 2,400 DESPITE the weaker Dollar and the stronger Apple does not give me the warm fuzzies about the strength of this weekly rally so, once again – we are going to be shorting the indexes at the levels we keep shorting them at and once again, later in the week, I will tell you how much money we made and you will say: "why can't I ever catch trades like that."  It's a vicious cycle…

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Monday Market Movement – Recovering on Low Volume

Same old, same old.  

If it's Monday, we must be recovering back towards Toppy Tuesday's highs so we will wait patiently to begin shorting again.  With Trump out of the country, we haven't had a crisis all weekend and they are keeping the President too busy to tweet – so all is well(ish) at the moment.  Unfortunately, no one is keeping the Fed from speaking and we have 6, yes SIX Fed speeches TODAY and then 2 tomorrow, 2 on Wednesday (and the Fed minutes at 2pm) 3 on Thursday and one on Friday for 14 Fed speeches in 5 days – a new record!

Endless Fed meddling is likely to give us a wild week leading up to Friday's Q1 GDP Report, which will be the 2nd estimate but the Atlanta Fed has already pegged Q2 GDP growth at a blistering 4.1% (almost double the first Q1 estimate of 2.3%) and, if true, the Fed has no choice but to tighten at the next meeting before we whip into an inflation crisis.  

We're already seeing tightening labor hammer productivity while driving up wages and we could be looking at 3-4% inflation rates by the end of 2017, which means you need to deduct that from your market gains to determine your buying power and, more importantly, deducting even 3% from bond gains pushes most of them into negative territory – a factor that could stampede even more money into the markets in search of inflation-fighting returns.  

That's going to blow us off the scale re. valuation metrics on the S&P 500, which is already showing overvalued levels on 18 of 20 of the metrics tracked by Bank of America (BAC) with the Shiller P/E Ratio a whopping 74% above average and the Market Cap of the S&P is almost double its usual percentage of our GDP:

As noted in last week's Live Trading Webinar (replay available here), we have no shortage of long positions and we took advantage of the dip to add a few to our Member Portfolios last week but, on the whole, we're still aiming to keep a mainly neutral stance, waiting for the market to decide if it wants to break up…
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Fleeing Friday – Trump Escapes to Europe

Image result for trump europe cartoonWill Trump come back?  

Julian Assange is finally coming back after 8 years in hiding, I wonder where Trump will be seeking asylum – perhaps Mother Russia?  As noted by CNN: "Besieged at home, Trump sets off for 'do-or-die' foreign trip," stating "if President Donald Trump's crucial first foreign trip passes off without a disaster, it will be considered a success."  8 days without a disaster?  It's only been 114 days so far and I don't think we've gone 3 in a row without a new scandal!  

Not only that but Julian Assange is back – I can't wait to see WikiLeaks turn its sights on Donald's secrets.  Over in Europe, they want to know if Trump is really pulling out of the Paris Climate Accord in defiance of the entire rest of the World, who ratified the treaty – there's a good start.  That's the middle of his trip, which Trump ends with a NATO meeting, where he has to explain to the actual Members why he thinks they don't do their share but first, Trump heads over to the Middle East, where he has boasted he can fix things.  

Of course the real purpose of the trip is to sell arms to the Saudis and we have our LMT and RTN back from when Trump was first elected (see: "Merry Trumpmas – Looking Forward to a Wild New Year").  Raytheon (RTN) is already over our $145 target and our trade idea for them was:

We also like Raytheon (RTN), who get paid almost $2M every time the US fires a Tomahawk missile (and we do that a lot!).   So, to bet on the escalating cold war (and the proxy wars we love to fight), we like:

  • Sell 5 RTN 2019 $120 puts for $8.50 ($4,200) 


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Throwback Thursday – Russians, Russians Everywhere and a President Who Doesn’t Think

Image result for communist witch huntLet the witch hunt begin!  

Direct from Central Casting we now have former FBI Director, Robert Mueller III playing the role of Special Counsel to investigate what the President alleges are non-existent ties between Russia and Team Trump as well as to determine the extent to which Russia worked to undermine the US elections.  

A lot of people are saying if we end up impeaching Trump then Pence will become President but if we're impeaching Trump because the Russians helped him steal the election – why would we then put his running-mate in charge?  I guess we'll cross that bridge when we come to it but clearly Mike Pence couldn't get elected dog catcher in 80% of this country.  Even now, when I went to the Wikipedia page to check on some Pence facts, I am reminded of the fact that the people had already spoken and they did not vote in favor of him or Trump:

America is one of the only remaining countries on the planet that doesn't elect their leaders using the popular vote and look what a mess we have already – just 112 days into Trump/Pence.  Clearly the markets were not pleased with the speed at which this Administration is coming apart at the seams and, of course, as toppy as they were – they were ripe for a nice fall anyway.  

A fall is certainly what we got yesterday, with both the Nasdaq (QQQ) and Russell (IWM) falling over 2.5% on the day.  According to our 5% Rule™, it it more likely we follow through for another 2.5% drop today and tomorrow than recover and that suits us just fine as we're bearish anyway (and congrats to all who used our bearish index hedges or SVXY hedge from Tuesday morning's PSW Report, which you would never miss by subscribing here).  

For the morning, we're looking to see if we get a weak bounce off yesterday's drop and, in the Futures, the Nasdaq (/NQ) fell from 5,700 to 5,550 which is 150 points so the bounce should be 20% of the drop or 30 points, back to 5,580 for a weak bounce
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Risky Wednesday – White House Turmoil Worries Markets

"Don't compare it to Watergate!"  

That is the GOP talking point du jour as an Army of Trump apologists storm the media to counter claims that President Trump asked the F.B.I. director, James B. Comey, to shut down the federal investigation into Trump’s former national security adviser, Michael T. Flynn, in an Oval Office meeting in February, according to a memo Mr. Comey wrote shortly after the meeting.  

The documentation of Mr. Trump’s request is the clearest evidence that the president has tried to directly influence the Justice Department and F.B.I. investigation into links between Mr. Trump’s associates and Russia. Late Tuesday, Representative Jason Chaffetz, the Republican chairman of the House Oversight Committee, demanded that the F.B.I. turn over all “memoranda, notes, summaries and recordings” of discussions between Mr. Trump and Mr. Comey.  Such documents, Mr. Chaffetz wrote, would “raise questions as to whether the president attempted to influence or impede” the F.B.I.

So you see, it's nothing like Watergate, where Nixon was attempting to "stonewall" the investigation – not impede.  Totally different this time…

The Watergate incident, like Russia meddling in the US election, took place during the time before the President took office and, like Watergate, Trumpgate is unfolding in May and will likely come to a head in the Summer.  In Nixon's case, the break-in happened in June of 1972, Nixon won by a landslide in November of 1972 and a year later, a defiant Nixon said "I am not a crook" and it wasn't until August 8th, 1974 when Nixon finally gave up, two weeks after Congress began impeachment proceedings.  

We're still waiting for this generation's "Deep Throat" to step forward and please, be careful if you Google that phrase!

Image result for nixon watergate doonesbury

Market-wise, the S&P was at 142 when Nixon was sworn in in January of 1973 and fell 39% to 86 by the time he resigned in August of 1974 as people's faith in the US economy deteriorated along with their faith in it's President.  We've all enjoyed the benefits of the "Trump Rally" with the S&P up 317 points (15%) but, as I noted yesterday morning (and 4 Tuesdays…
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Toppy Tuesday – S&P 2,400 – Again

Here we are again:

It seems like every Tuesday I have to point out that Mondays are meaningless and, so far, we've made good money shorting the S&P Futures (/ES) at 2,400 as well as Dow (/YM) 21,000 and Russell (/TF) 1,400 but the Nasdaq (/NQ), now 5,708 keeps going up and up, which is no surprise with Apple (AAPL) at $156 – up 10% since April 25th and AAPL is 15% of the Nasdaq by itself.

That adds 1.5% to the Nasdaq and the rest of the Nasdaq's 3% move came from the Dollar falling from 100 on the 25th to 98.35 this morning (-1.65%) and that's the story of how we got here.  The fact that the S&P STILL can't get over 2,400 DESPITE the weaker Dollar and the stronger Apple does not give me the warm fuzzies about the strength of this weekly rally so, once again – we are going to be shorting the indexes at the levels we keep shorting them at and once again, later in the week, I will tell you how much money we made and you will say: "why can't I ever catch trades like that."  It's a vicious cycle…

Remember, I can only tell you what the market is going to do and how to make money trading it – that is the extent of my powers.

Yesterday morning, for example, in our PSW Report, we picked FEYE as a nice play since the news was all about cyber security and FEYE is a company we've had our eye on.  Despite the strong open (our Members get the report long before the market opens) on the stock, the 2019 $12 puts were barely affected and, as late as 2:10 pm, people were still filling the short puts at our $2 target price and they finished the day at $1.84, up 8% for a nice start (see yesterday's post for details on the trade idea).  

On Friday it was Cheniere Energy (LNG), based…
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Cyber Monday – Hack Attack Affects 200,000 Computers, Markets Oblivious

Nothing seems to matter. 

On Friday a ransomware attack hit 200,000 computers in 150 countries and the source seems to have been files that were stolen from our very own NSA by WikiLeaks.  Now, granted this attack only affects people who haven't updated Microsoft (MSFT) Windows since March and another patch came over the weekend – so the good news is that MSFT seems to be able to keep on top of these things but random cyber-attacks are yet another risk factor the market is now ignoring as we hover around those record highs.

As a trade idea off this madness, I like FEYE, who provide Corporate Cybersecurity Solutions and whose phones should be ringing off the hook this morning as it occurs to many more companies that maybe it is important to have someone make sure their computers aren't attacked by malware.  

FireEye (FEYE) is a pre-profit company but growing at about 20% and likely 2 more years away from turning a profit but, at $14.79, you can sell the 2019 $12 puts for $2.05 for a net $9.96 entry, an additional 32% discount to the already low price. It's a good way to get your feet wet and watch the stock and ordinary margin on the short puts is only $978 if you sell 10 so you collect $2,000 against $978 in margin and your return on margin is over 200% and all the stock has to do is stay above $12, giving you a $2.79 cushion (19%) on your full gain.

Another big story this morning is oil, which has popped over our 2.5% line at $49 and that has been good for our longs, which gained $8,200 for the day (you're welcome) and we're setting tight stops here as we're up over $5,000 overall making this a very successful trade from Wednesday's Live Trading Webinar.  

Oil is up on news that Russia is agreeing with OPEC to extend production cuts through the first quarter of 2018 and that should all be ratified at the meeting a week from Thursday.  Of course they are asking the US producers to voluntarily cut back and…
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Zero Hedge

Medal Of Honor Recipient Warns: "It's Going To Come Here... Trump Must Release The Gates Of Hell" On Islamic State

Courtesy of ZeroHedge. View original post here.

Authored by Mac Slavo via SHTFplan.com,

With British Prime Minister Theresa May warning that another attack may be imminent, Medal of Honor Recipient Dakota Meyer says that it’s time to strike Islamic State strongholds with...



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Phil's Favorites

Ben Carlson on Market Breadth

 

Ben Carlson on Market Breadth (Video)

Courtesy of Joshua Brown, The Reformed Broker

Ben had a hit on Bloomberg TV last night talking about his recent piece on market breadth and why it’s perfectly normal to see the market being led higher by some very big winning stocks. His research shows that this is always the case during bull markets and that broader measures of the internals are healthy, not sick.

Check this out:

…and you can read his expanded thoughts on ...



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ValueWalk

Neil Howe Of The Fourth Turning - We Are In The 1930s; "Winter is coming"

By Mauldin Economics. Originally published at ValueWalk.

By Mauldin Economics From the Balkans to the US, walls are going up, not down, according to demographer and The Fourth Turning author Neil Howe.

Speaking to a packed crowd at Mauldin Economics’ Strategic Investment Conference in Orlando, Howe said we are reliving many of the same trends and changes of the 1930s.

Faith in Democracy Is Fading

“Worldwide, people are losing trust in institutions,” he said. “Trust in the military, small business, and police is still there. But trust in democracies, media, and politicians is dropping.”

“When was the last time we saw these changes and the rise of right-wing populism?” he asked....



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Digital Currencies

Bitcoin Is Crashing (Again)

Courtesy of Zero Hedge

While Bitcoin is still up 13% on the week (its 8th weekly ruse of the last 9), the dollar price of the virtual currency is collapsing again in US trading (after a big rebound during the Asian session)...

Just as with yesterday, there is no immediate news catalyst for the flush.

Meanwhile, the huge arb with South Korea bitcoin pricing remains, and as of this moment is still nearly $1000.

Today's drop ...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

U.S. stocks scale new peaks on retailer results; oil falls (Reuters)

Two top U.S. equity indexes scaled record peaks on Thursday after strong earnings reports from retailers, outpacing European shares which were little changed, while oil prices plunged after top crude producers extended output cuts for a shorter period than expected.

Hedge Funds Squeezed by World's Highest Rents Are Moving Out (Bloomberg)

Benjamin Fuchs raised eyebrows five years ago when he opened his hedge fund next to a place selling live chickens in Hong Kong’s hustling, bustl...



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Chart School

S&P Breakout on Higher Volume Accumulation

Courtesy of Declan.

While I expected the Dow Jones to be the breakout flyer, instead it was the S&P which led the charge on higher volume accumulation.  Technicals are all in the green with a return of the MACD trigger 'buy'.



The Dow did manage to break past 21,000 with a MACD trigger 'buy' but it's still contained by all-time high resistance at 21,200. The index is still well positioned for a larger breakout, but this is the sixth day of consecutive gains for the index so some pullback can be expe...

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Members' Corner

Robert Sapolsky: The biology of our best and worst selves

Interesting discussion of what affects our behavior. 

Description: "How can humans be so compassionate and altruistic — and also so brutal and violent? To understand why we do what we do, neuroscientist Robert Sapolsky looks at extreme context, examining actions on timescales from seconds to millions of years before they occurred. In this fascinating talk, he shares his cutting edge research into the biology that drives our worst and best behaviors."

Robert Sapolsky: The biology of our best and worst selves

Filmed April 2017 at TED 2017

 

p.s. Roger (on Facebook) saw this talk and recommends the book ...



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OpTrader

Swing trading portfolio - week of May 22nd, 2017

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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Biotech

Beyond just promise, CRISPR is delivering in the lab today

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

Beyond just promise, CRISPR is delivering in the lab today

Courtesy of Ian HaydonUniversity of Washington

Precision editing DNA allows for some amazing applications. Ian Haydon, CC BY-ND

There’s a revolution happening in biology, and its name is CRISPR.

CRISPR (pronounced “crisper”) is a powerful technique for editing DNA. It has received an enormous amount of attention in the scientific and popular press, largely based on the promise of what this powerful gene e...



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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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Mapping The Market

Bombing - Right or Wrong?

Courtesy of Jean-Luc

I am telling you Angel – makes no sense… BTW:

Republicans Love Bombing, But Only When a Republican Does It

By Kevin Drum, Mother Jones

A few days ago I noted that Republican views of the economy changed dramatically when Donald Trump was elected, but Democratic views stayed pretty stable. Apparently Republicans view the economy through a partisan lens but Democrats don't.

Are there other examples of this? Yes indeed. Jeff Stein points to polling data about air strikes against Syria:

Democr...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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All About Trends

Mid-Day Update

Reminder: Harlan 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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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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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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