Phil's Newsletter

Faltering Friday – Will Oil Drag the Markets Down in August?

Will the last short seller please turn out the lights?

According to S3 Analytics, Bets against the SPDR S&P 500 (SPY), the largest ETF tracking the broad index, fell to $38.9Bn last week, the lowest level of short interest since May, 2013.  The same thing is going on in hedge funds as we're well below 2013 levels in short funds – people have simply given up on the idea that this market is going to go down – and that's probably the best time to short it!  

In our Portfolio Reviews this week, we have been pressing our hedges by using about 1/4 of the money we have made on our longs, simply trying to lock in our gains as we certainly don't expect the market to make 4-7% every month – that would be silly, right?  These days, you have to wonder as the S&P is up 25% from the mid-point (not the lows) of 2015 and early 2016 (2,000) yet, as I noted in yesterday's Live Trading Webinar (Members Only, but you can see the replay here) the earnings of the components of the S&P are not matching those gains at all:

Apple (AAPL) is the top component of the S&P.  With an almost $800Bn market cap, it makes up 3.7% of the index.  In 2015 they had $233Bn in sales and made $53Bn, last year they had $215Bn in sales and made $45Bn and this year they are looking for $220Bn in sales and $46Bn in profit yet AAPL is trading 60 points higher (66.6%) than it was at the beginning of last year (after 2015 earnings were reported).  What has AAPL actually done to justify a 66% gain?  Mostly, it was drastically undervalued but, other than that – it has added no profits to the overall S&P.  In fact, it has subtracted them!  

AAPL is also the largest Dow component and $1 in share price is 8.5 Dow points (yes, it's an idiotic system).  So AAPL alone is responsible for 510 points (12.5%) out of the Dow's 4,100 point run from 17,500 (23%).  Now I love AAPL, it was our Stock of the Year in 2013, 2014 and 2015 (this year it is WPM), so I'm fine with their value now, it was…
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500,000 Thursday – Trump Orders GOP to Kill Over 4,000 People Per Month

Every 12 minutes.

That's how often an American citizen dies due to lack of health care.  Trump gave a fiery speech yesterday ordering his Republican goons to repeal Obamacare at any costs – and the costs are turning out to be staggering.  According to the Congressional Budget Office, Trump's plan will throw 32 MILLION Americans off health care and that will cost over 500,000 of them their lives over the next 10 years.  

That will make Trump, the GOP and the people who voted for them, the greatest mass murderers in the history of this country – right up there with the worst in World history (would rank #12, actually).  And why are they doing this, why do 4,000+ Americans have to die every month?  Well, according to the Congressional Budget Office, taking health care away from 1 out of 10 people you see today will save us $473Bn – over 10 years.  That's $47.3Bn a year and that does sound like a lot but there are 165M taxpayers so we each save $286.66 per year.  

$286.66 a year!  How many people would you kill for that kind of money?  Next time you are at a football stadium (50,000 people) pick 8 people to kill because that's how many out of 50,000 (1/6,400) are being killed to give you $286.66.  In fact, the amount of people in the stadium (all of them) is just about how many people your vote will be killing each year.  Isn't that GREAT!?!?  America is truly great again when we can value $286.66 over 50,000 human lives.  

And, if you think your own health care bill won't rise quite a lot more than $286.66 without Obamacare protections, then you are way too far down the rabbit hole to be saved.  The repeal-only act will increase premiums for those who hold plans, according to the CBO.  The office estimates that "average premiums in the nongroup market (for individual policies purchased through the marketplaces or directly from insurers) would increase by roughly 25%" in one year.  That average premium increase would hit 50% by 2020 compared to projections of rates under the current law, and double by 2026, the CBO said.

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Will We Hold It Wednesday – New Highs Again?

Up and up she goes.  

Now we're watching that 6,000 line on the Nasdaq (/NQ) Futures which is up 33% in 18 months and up 40% from the lows of Jan, 2017.  We barely paused at 5,000 and didn't pull back at 5,500 but our first attempt at 6,000 was rejected and, if we call it a 1,500-point run from 4,500, then the "weak" reatracement, according to our 5% Rule™, would be back to 5,700 – and it was.

Holding the weak retracement is a sign of strength – indicicating that it's more likely we're consolidating for a move up than making a sustained move down and now we're testing 6,000 again but now we have to raise the bar and cannot accept more than a 150-point correction (5,850) to stay bullish on the Nasdaq and failing 5,700 would signal the start of a broader correction, down to 5,400 or possibly all the way to 5,000 before stabilizing.  That's why we pressed the hedges in our Short-Term Portfolio (which protects our Long-Term Portfolio) as well as our Options Opportunity Portfolio, though we still didn't find many long plays we wanted to take off the table.

That leaves us, so far, net bullish and more bullish than we thought as we "only" have about $300,000 of downside protection in our Short-Term Portfolio against a Long-Term Portfolio that gained $200,000 (17%) in the past 30 days – very aggressively bullish.  The Nasdaq is up 300 points (5%) since our last LTP review and that in itself calls for at least a 1% correction (60 points), back to 5,840 but that would then be below 5,850 – so you can see why this is such a tricky spot.  

Not much to do but see how the week plays out.  In yesterday's Live Member Chat Room, we took the money and ran on our Tesla (TSLA) short position and we added a long on Chipotle (CMG) towards the close as their sell-off has just gotten silly.  I'm not supposed to be giving away trades but this is such a juicy one I'll tell you what I said to our Members at 2:37:

"CMG Aug $370 calls are $14.30 and were $47 two weeks ago.


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Temper Tantrum Tuesday – GOP Wants to Scrap Obamacare Without Replacement

Image result for you'll get nothing and you'll like itYou'll get nothing and like it!  

That is the new GOP plan for your health care as their 3rd attempt at crafting a replacement for Obamacare goes down in flames.  "Republicans should just REPEAL failing ObamaCare now & work on a new Healthcare Plan that will start from a clean slate. Dems will join in!" wrote the Whiner in Chief on Twitter last night.  He was right, I am tired of whining

All this political turmoil (and yes, Russia is still a thing) has not been good for the Dollar, which is down another 0.5% this morning to 94.40 and that is the only thing keeping the indexes afloat at the moment as Europe is down 0.5-1%.  The weak Dollar is also boosting commodites and Brent Oil (/BZ) is at $49.40 while Texas Oil (/CL) is $47.15 and back below the $47 line is a great place to short (with tight stops over) as Ecuador has broken ranks with OPEEC and will be pumping more oil AND, much more important, the EIA projects record US shale output in August that will add another 3.5Mb to our bloated inventories.

I put out a note to our Members this morning to short /ES at 2,457.50 and we're going to review our Member Portfolios and press our hedges as we made RIDICULOUS gains while I was on vacation and we want to lock them in.  In our June 18th Long-Term Portfolio Review, we were at $1,399,805, which was up 180% from our $500,000 start back on 11/26/13 and, as of yesterday's close, we're at $1,639,658 (up 227%).  That is up a RIDICULOUS $239,853, which is up 17% from where we were a month ago and a gain of anoither 48% from our $500,000 principle.  

Not only that, but our Short-Term Portfolio, which we use to hedge our Long-Term Portfolio, also made money.  It was "only" up $17,651 for the month but, when your hedges don't lose money while your long positions do – that's unusual and it's something you should certainly take advantage of the situation and either raise more CASH!!! (have I mentioned how much I like CASH!!! lately), lock in your gains or…
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Monday’s Missing Market Mechanism – Infrastructure

Image result for tanned and restedI'm back!

In my quest to better understand the Global economy (and it's affect on teens), I dragged my family off to France and the UK for the past two weeks and tested the effects of Socialism on two girls who were raised in an entirely Capitalist system.  While we're still tabulating the data, certain trends are evidend such as "public transport is amazing", "free health care, are you kidding me?" and, of course, "free college – can we move here Dad?".  

Jackie was very impressed that the beaches don't charge fees, Maddie is actively finding out if she can keep her 504 Plan College fund if she goes to Europe instead.  Not a bad idea, really, as she's fully-funded for college but, if she takes an Advanced Learning Loan in the UK (which would require her to establish residency first), she would have her college paid for with the obligation to pay back 9% of her income over $27,000/year.  After 30 years, the program terminates, whether the loan is fully paid back or not.

That's a very fair way to have students pay for college and Madeline realizes that, since she already has enough money to buy a house in her US fund – she'd be miles ahead of the game.  Frankly, if I hadn't wisely funded the kids' 504 plans when they were born or had the market been unkind to their funds – I would have seriously considered moving the family to Europe when they started high school becasue we're talking at least $300,000 and probably closer to $500,000 to put two kids through good schools and we too could have gotten a free house in exchange for moving to Europe.  Now do you see why housing prices in London are soaring? 

Image result for london housing prices

Not only that but my Uncle has a $2M home in London and pays about 20% of the property taxes I pay on my much more modest home in New Jersey.  He also doesn't spend $20,000 a year on health care for the family with no co-pays, no deductibles – NOTHING!  For that, he is taxed 45% of his income over $150,000 but there's no tax…
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Funtime Friday – Earnings Season Starts Today

It's my favorite time(s) of year!

JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC) kick off earnings season this morning but it's a very low bar set for the banks as they have all cut their profit forecasts in the last few weeks so expectations are low – especially as the 2nd quarter is usually weak for trading.  Overall, the sector (XLF) is up 10% since early June and now we'll see if it's justified or not. Q1 results, which came out in late March, sent the sector off a cliff but they've climbed back since on the same fairy-dust that's powering the rest of the bubble.

Bank Notes:

  • Related imageJPM missed, WFC missed and C beat but C reduced their loan-loss reserves from $12.3Bn to $12Bn, something banks can do "because they feel like it" and that effectively popped their bottom line by $300M.  C's outstanding loans was up 2%, to $645Bn so the reduction in reserves is C telling us that they don't feel more than 1.86% of those loans will default while the industry standard is 2-2.5% or $12.9Bn – $16.1Bn so, effectively, C is goosing their bottom line by $900M-$4.1Bn by simply pretending their loans (student loans, sub-prime auto loans, retail store loans) are the safest in history!  
  • JPM dropped their loan-loss reserves to $1.22Bn from $1.4Bn, adding $178M to their "earnings" and, if that seems a little thin to you, consider that they did, in fact, write down $1.2Bn in loan defaults in Q2 and that covers just 0.56% of their portfolio, down from 0.79% in Q1.   
  • At least WFC is honest about it, saying "Net income increased $315 million, or 15 percent, from second quarter 2016, primarily due to the tax benefit in second quarter 2017 and lower loan loss provision" but, then again, it's kind of hard not to mention a $450M decrease in your loan loss reserves!  For those of you keeping score, that is  % of their earnings.  WFC now has $11.073Bn provided for on $957.42Bn in loans or 1.15% – that'd double JPM's joke of a reserve but half of Citi's.

Don't forget that if ANY of these banks fail –…
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Thrilling Thursday – Back to the Top at 2,440 – Time to Short Again

The markets will go down again now

The reason doesn't matter – just that 2,440 is our magic number at the top and it's been a reliable shorting line since early June.  Yellen's testimony yesterday was a very silly reason to have a rally – she said the same things she's been saying all year, neither more hawkish or more doveish than she was when the S&P was 10% lower than it is now.

This is right where we thought we'd be as yesteray, at 9:09 am, in our Live Chat Room, I said to our Members:

On the indexes, 2,440 on /ES is our current shorting spot and we can see that's going to line up with /YM 21,500, /NQ 5,775 and /TF 1,425 so we WANT to short /ES at 2,440 as long as the others aren't breaking over and if ANY of them break over, we stop out of /ES and wait for at least 2 of them to cross back under and then short the laggard.  

The Nasdaq plowed up to 5,800 but the other indexes are right where we want to short them and the Russell (/TF) is our favorite short, at 1,425, moving $50 per contract (we prefer 2) per point in our favor.  Whenever the answer to "Why did the markets make all-time highs today?" is "no particular reason" – then it's a good time to short.

Speaking of shorts, you're welcome for yesterday's idea to short Oil (/CL) Futures, which hit our $46.20 target on the button and gave us a nice run back down to $45 for a $1,000 per contract gain and Gasoline (/RB) hit $1.50 for a $1,470 per contract gain and now we're back off the shorts as we're heading into the weekend where we're actually hoping Oil and Gasoline is pumped higher so we can short it again.  

Not much happening today but Target (TGT) interestingly raised their guidance "as a result of improved traffic and sales trends through the first two months of the quarter."  That suits us as we're long and it's a big raise from $1.06 to $1.15 and shares are up over 5% pre-market.…
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Wild Wednesday Markets – Dollar Drop Offsets Trump Dump

Wheeee, what a ride! 

We had a nice little dip yesterday as it was revealed that Donald Trump Jr, Jared Kushner and Paul Manifort clearly committed Federal Crimes (campaign finance laws) which say:

 "A foreign national shall not, directly or indirectly, make a contribution or a donation of money or other thing of value, or expressly or impliedly promise to make a contribution or a donation, in connection with any Federal, State, or local election.

"A solicitation is an oral or written communication that, construed as reasonably understood in the context in which it is made, contains a clear message asking, requesting, or recommending that another person make a contribution, donation, transfer of funds, or otherwise provide anything of value."

Image result for trumpgateThe cover-up is now incidental to the actual crime and now the question is whether the President knew what his campaign manager, son and son-in-law were doing or if he was completely oblivious, as he now claims.  Anything other than completely oblivious is an impeachable offense for Presdident Trump so we'll have to hope it's a coincidence that:

"On the same day Donald Trump Jr. confirmed the meeting with Mr. Goldstone—two days before the meeting took place—the elder Mr. Trump at a rally promised to give a “major speech” days later that would address “all of the things that have taken place with the Clintons.”

The "good news" is the markets were saved, for the moment, by a weakening Dollar, which dropped 0.5% as International Traders lost even more confidence in the United States of America and it's Government.  Dropping the value of the Dollar instantly makes things you buy with a Dollar, like stocks and gold, more expensive (in Dollars) and so the Gold (/YG) trade idea we had for you in yesterday morning's PSW Report made a quick gain of $322 per contract on the $10 move higher (rejected at $1,220) so you are welcome for that AND the ABX trade,
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Tricky Tuesday – Markets Make Tempting Bounces but Not Good Enough

Things are still toppy.

As you can see from the S&P 500 chart, we're still in that range that tops out at 2,440 but we've held 2,400 so far for June so still generally bullish but now the 50-day moving average has caught up with us at 2,415 so we can no longer be satisfied with anything less and there's really no proper support below 2,400 – all the way to the 200 dma at 2,300 (a 5% Rule™ drop).

Yesterday morning, in our Live Member Chat Room, we took a bull play on the Russell Futures (/TF) at 1,408 and we caught a nice 10-point move up for $500 per contract gains in 2 hours at which point I said to our Members:

Now we take that off the table and look for either a fresh horse or, because the indexes all look toppy now, look for a possible reversal.  

/NQ 5,700 is very likely to be rejected so that's a good line if /TF is below 1,420 and /YM below 21,400 and /ES below 2,430 (which indicates they all failed their next breakout).  

So shorting /NQ with the stop above 5,700 is the most likely play now. 

As you can see on the Nasdaq (/NQ) chart, 5,700 has remained a good shorting line and, at the moment, we're down more than 10 points at $20 per point, per contract so $200 per contract gains on those too.   We can remain short on /NQ if the S&P (/ES) is below 2,425 and the Russell (/TF) is below 1,410 but we might flip bullish on the Russell at 1,405 if the indexes look bouncy.

Yellen…
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Monday Market Momentum – Still Movin’ On Up

Nothing seems to matter.

Trump's appearance at the G20 meeting this weekend was universally reviled as one of the worst foreign policy disasters since Chameberlain met with Hitler yet there's no indication of it in the Futures as we seem to be holding Friday's pumped-up, low-volume gains – so far.  

ABC's political editor, Chris Uhlmann delivered a scathing analysis of Donald Trump’s presidency during the G20 summit, accusing him of hastening America’s decline as a global superpower and criticised Trump’s presence at the summit in Hamburg, his leadership and use of Twitter, saying his actions in diminishing America are “the biggest threat to the values of the west."

No one at the event was able to disagree as America lost on every possible point while our former allies did end runs around us to make trade agreements with each other now that Trum is questioning our own long-standing trade deals.  It's been 45 years since Nixon went to China but Trump has pushed American foreign policy back to the stone age in just 6 months, generally to Vladimir Putin's advantage.

Putin, for his part, said he would happily accept President Trump's invitation to form a cyber security task force and get to the bottom of who is hacking the elections.  He also pointed to the reporters who were in the room for a briefing and said "These are the ones who insulted you?" to which Trump replied "These are the ones, you're right about that" and you can see Putin's man to his left making an ominous list (Putin is known for eliminating reporters who displease him). 

This is, of course, right after Trump has retweeted a video of Trump attacking a CNN proxy at a wrestling match and just last month Putin was joking with Czech President Milos Zeman about "liquidating" journalists.  Of course, Putin has mellowed over the years.  In 1995 and 1996, over 50 journalists were killed and only 5 in the last 2 years so either Putin is getting soft or reporters have gotten the message.  Either way, you can see why a budding Despot like Trump would look to Vlad for guidance…

We're still in post-holiday, low-volume mode in the markets and, as you can…
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Zero Hedge

"It Feels Like An Avalanche": China's Crackdown On Conglomerates Has Sent A "Shock Wave" Across Markets

Courtesy of ZeroHedge. View original post here.

The first to suffer Beijing's crackdown against China's private merger-crazy conglomerates, wave was the acquisitive "insurance" behemoth, Anbang, whose CEO Wu Xiaohui briefly disappeared as the Politburo made it clear that the "old way" of money laundering - via offshore deals - is no longer tolerated. Then, several weeks later and shortly after the stocks of the "...



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Phil's Favorites

A new vaccine is promising to advance the frontier of eliminating malaria

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

 

A new vaccine is promising to advance the frontier of eliminating malaria

Courtesy of Simon KariukiKenya Medical Research Institute

A malaria vaccine will be piloted in Ghana, Kenya and Malawi to assess its suitability. Siegfried Modola/Reuters.

More than 30 malaria vaccine candidates are at various stages of development. The RTS,S vaccine is at t...



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Biotech

A new vaccine is promising to advance the frontier of eliminating malaria

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

 

A new vaccine is promising to advance the frontier of eliminating malaria

Courtesy of Simon KariukiKenya Medical Research Institute

A malaria vaccine will be piloted in Ghana, Kenya and Malawi to assess its suitability. Siegfried Modola/Reuters.

More than 30 malaria vaccine candidates are at various stages of development. The RTS,S vaccine is at t...



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ValueWalk

Curreen Capital - Do I Regret Selling Those Stocks?

By VW Staff. Originally published at ValueWalk.


Curreen Capital – Do I Regret Selling Those Stocks?

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Insider Scoop

Different Market, Same Story: Subprime Auto Loan Defaults On The Rise

Courtesy of Benzinga.

Related Benzinga's Top Upgrades, Downgrades For July 18, 2017 Watch These 7 Huge Put Purchases In Thursday Trade Rel...

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Digital Currencies

Bitcoin (BTC/USD) Nears All-Time High on Spike Above Daily Chart Downchannel Resistance

Courtesy of ZeroHedge. View original post here.

Bitcoin (BTC/USD) crushed shorts yesterday, smashing above the daily chart's downchannel resistance and soaring towards the all-time high around 3000. With yesterday's massive rally, the negative weekly MACD crossover has been proved a false signal.  Odds are quite good that a sustainable longer term BTC/USD bottom was found last week, especially with ETH/USD also strongly rebounding this past week.  Some consolidation can be expected today with daily RSI and Stochastics tiring, although with daily MACD just having positive...



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Chart School

Small Caps Breakout

Courtesy of Declan.

It has taken a few days for Small Caps to make their move but today was the day the Russell 2000 joined other indices in mounting a breakout. It was a clean breakout supported by positive technical strength - putting to bed the June 'bull trap'. Watch for the second round of stop-whips with an intraday move (and recovery) below 1,430.


Other indices added to their breakouts. The S&P gapped and pushed on, backed by higher volume accumulation. Watch for a tag of upper channel resistance.

...

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Members' Corner

Why we need to act on climate change now

 

Why we need to act on climate change now

Interview with Jan Dash PhD, by Ilene Carrie, Editor at Phil’s Stock World

Jan Dash PhD is a physicist, an expert at quantitative finance and risk management, and a consultant at Bloomberg LP. In his thought-provoking book, Quantitative Finance and Risk Management, A Physicist's Approach, Jan devotes a chapter to climate change and its long-term systemic risk. In this article, Ilene interviews Jan regarding his thoughts on climate change and the way it can affect our futu...



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OpTrader

swing trading portfolio - week of July 17th, 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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Mapping The Market

The App Economy Will Be Worth $6 Trillion in Five Years

Courtesy of Jean-Luc

This would be excellent news for AAPL and GOOG to a lesser extent although not inconsequential:

The App Economy Will Be Worth $6 Trillion in Five Years 

In five years, the app economy will be worth $6.3 trillion, up from $1.3 trillion last year, according to a report released today by app measurement company App Annie. What explains the growth? More people are spending more time and -- crucially -- more money in apps. While on average people aren't downloading many more apps, App Annie expects global app usership to nearly double to 6.3 billion people in the next five years while the time spent in apps will more than double. And, it expects the...



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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

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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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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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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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