Phil's Newsletter

Thursday Bounce Line Failure – Trouble Ahead?

This is not what the bulls wanted to see.

In yesterday's PSW Report "Weak Bounce Wednesday – B-B-B-Brexit Baby!," we called for shorts below 20,600 on the Dow Futures (/YM), 2,350 on the S&P Futures (/ES), 5,406 on the Nasdaq (/NQ) and 1,360 on the Russell (/TF) but we had a pop in the morning and only the Dow went below our line but, in our Live Trading Webinar, we decided to short /TF anyway with 4 short at an average of 1,371 and, now that we're below that line, we can take 2 contract off at 1,369 for a $400 profit and put a stop on the last two at 1,370 to lock in at least $500.  

We're also excited about an opportunity to short oil again as it tests the $50 line this morning (/CL).  Brent crude (/BZ) is also at resistance at $52.50 and we won't short /CL with much enthusiasm (so very tight stops) if  Brent is over but $50 is a tough line for /CL to cross – so it's well worth a short as we get over $49.85 with tight stops over the $50 line, which limits our losses to $150 per contract.   

Over at the NYMEX, there's more than 3 weeks left to FAKE!!! demand but they are already faking demand for over One BILLION barrels of oil for delivery between now and July 20th.  That's only 113 days away so the open contracts on the NYMEX are PRETENDING that they are going to order 9.5 MILLION barrels a day to be delivered to Cushing, OK, a facility that can only handle 90M barrels TOTAL, IF it were not full – which it is.

Of course, it's not a great day to short anything as we're into the normal end-of-month window-dressing so we can expect everything to be propped up a bit.  Even the Dollar is back over 100 (good for $500 per contract on /DX, you are welcome!) and Apple (AAPL) is testing $145, which is now over $1,000 per share pre-split (7:1), up from $85 (pre-split) when I used to foam…
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Weak Bounce Wednesday – B-B-B-Brexit Baby!

Oh baby you know what I like
Chantilly lace and a pretty face
And a pony tail a hangin' down
That wiggle in the walk 
And giggle in the talk
Makes the world go round
There ain't nothin' in the world
Like a big eyed girl
That makes me act so funny
Make me spend my money

Well Brexit is official as the UK finally sent it's breakup letter to the EU (not a text, mind you, the UK is classy that way) and now there is a definitive 2-year countdown clock before they officially divorce – unless they decide to extend it – then it could be longer.  Makes you kind of wonder what all the panic was about.  It's like when your parents get divorced but keep living in the same house.

The markets continue to be divorced from reality as we watch the S&P run a textbook 5% Rule™ correction as it falls 2.5% to 2,340 from 2,400 and that's a 60-point drop so our fabulous 5% Rule™ predicts a 20% weak bounce (12-points) to 2,352 and a 40% strong bounce to 2,364 which, no coincidentally at all, happens to be the 50-day moving average on the S&P.

Of course we are shorting at the 50 dma.  I put a note out to our Members this morning in our Live Chat Room, saying:  

/YM testing 20,600 from above – off a bit from yesterday's close.  /ES 2,350, /NQ 5,406 and /TF 1,361 – all off their highs and we can play the laggards below those lines (5,400 on /NQ and 1,360 on /TF).

As noted above, these are just the weak bounce lines we expected to get to (and fail) after last week's sell-off so, if we're breaking down here – it's a good sign to short the indexes again.


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Tuesday Trump the Terrible Signs Death Warrant for Planet Earth

Image result for donald trump vaderToo political?  Well F you!  

Today, the lunatic in the White House will sign an executive order (no Congressional approval – just his own insane plan) to unravel the climate-change policies Barack Obama enacted in the hopes of saving the Planet Earth.  Oh, and fun fact for you Republican voters – WE LIVE ON PLANET EARTH!!!  

Now, I'm not asking you to believe in climate change.  I'm simply asking you to believe in logic. The Republicans like to say: "The science isn't conclusive" and let's say we accept the fact that your child has a high temperature that may prove fatal if it gets higher and 97 doctors you take him to say you need to IMMEDIATELY get his temperature down or he might die but 3 say – we don't know for sure it will kill him so let it run its course. 

So, what do you do?  Do you just let you child sweat and shiver and get worse and worse while you watch and do nothing or do you TRY to do something to make him or her better?  Well, Donald Trump just decided not only not to do anything but to stop every other parent on this planet from doing something.  In fact, although 97% of the scientists believe man-made carbon-dioxide is causing the problem – Donald J Trump (to be known as "Trump the Terrible – Destroyer of Earth" in our future) is also passing laws to INCREASE our production of CO2.  

Image result for rex tillerson signatureAs noted by Stephen Colbert, in that clip from 2014, Exxon (XOM) was a major force in the climate-denying movement and it is THEIR PAID SCIENTISTS that are the 3 out of 97 that deny climate change and, by the way, who signed their checks at the time – Rex Tillerson – our very own new Secretary of State, back when he was just the lowly CEO of Exxon.  

Image result for climate denialOf course it's not a "conspiracy" – it's simply a coincidence…
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TrumpDon’tCare Plan Fails to Pass – Will the TrumpDon’tTax Act be Next?

And down we go!  

I'll bet those hedges are looking better and better every day now, right?  Now that the enthusiastic GOP investors have learned their first (of many) political lessons of the Trump Error (and we had plenty under Obama when we had both houses), we'll see how their enthusiasm for the market holds up because, as we've noted before – there is/was a huge disparity between economic optimism of Republicans and Democrats and, if the Republicans begin to doubt to the Power of Trump – all those confidence numbers can drop like a rock tied to a bigger rock.

Even as I write this we're getting mail from people trying to explain gravity to us.  Yes, we get it, it was an expression!  On the other hand, a lot of the basics need to be explained to the Trump camp and their supporters if they are going to get anything other than executive orders passed this term (however long that lasts).  The Futures, meanwhile, are following through to the downside this morning and we ran our 5% Rule through the Charts in this morning's Alert to our Members.  Here are the Dow notes as an example:

So Dow 21,000 less 5% is 19,950 and 2.5% is 20,475 so we'll look for that for support and the 525 drop we can call 20,500 the line that matters with 100-point bounces to 20,600 and 20,700 but I'd start shorting at 20,600 – if we even make that.  Worse would be failing to retake 20,500 – then it's almost a certainty we drop another 500.

This is happening despite us being wrong about the Dollar on Friday morning, as 99.50 did not hold and we are now at 98.90, which is down $700 per contract (/DX) at the moment but I still have faith but, if I'm right, that will be bad news for the indexes as the weak Dollar is the only thing keeping them from those 5% corrections that we think are inevitable at this point (so you may was well lay back and enjoy it – hat tip
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Falling Friday – Market Wraps Up Worst Week of Trump Error

Image result for trump don't careUtter chaos!

As noted by the GOP leadership: "There is no Plan B" to the TrumpDon'tCare Act.  Either the GOP guts health care and takes insurance away from 24M Americans and begins to defund Medicaid or, as Trump now states "Obmacare Stays."  I know – WTF?  Is it possible that the GOP has purposely put forth an unpassable bill BECAUSE they realize Obmacare is too good to kill?

Keep in mind this is just the House Vote on Health Care, which was supposed to be easy, the Senate vote is next and the changes they made in the bill could cause it to fail simply under the parliamentary rules (because they changed it to a simple majority, which caused other rules to kick in).  

If 3 GOP Senators defect, the Bill dies and, even if it passes, the Dems can tie it up in court for a long time.  Since they have a 44 vote advantage in the House (10%) and can't get them in line, it's reasonable to assume they are going to have trouble with at least 5 Senators and Senators have to Represent whole states – this is a suicide mission for Republican Senators from Democratic states.  It's very possible this battle will cost the GOP the Senate next year and the Senate gets to do all those fun investigations.  So that's the upside on the Bill – the downside is TOTAL CHAOS!

Image result for white house chaos cartoonOf course, that may be exactly what the White House wanted because, clearly, they did not have a real Health Care plan but, much more importantly, you forgot all about Trump's false accusations that Obama tapped his phone and, even though Devin Nunes jumped on a grenade for Trump and tried to convince the American People that mentions of the Trump team in some investigations justified Trump's paranioa (destroying his own reputation in the process) - no one really fell for it but, suddenly, Health Care distracted us – how convenient!  

Yesterday, I was on the Benzinga Pre-Market Report at 8:30 and they asked me how to play the Dow and I told them (20 minutes in): "Figure
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Thoughtless Thursday – TrumpDon’tCare Health Plan Gets a Vote

Image result for trump health careBig vote tonight.

If the TrumpDon'tCare Plan is approved (the CBO says it can no longer be called a health plan since the overall goal is to kill as many people as possible), then Trump's agenda is winning and the markets could leg higher.  If, on the other hand, the GOP revolts against The Donald, all Hell could break loose so ignore the politics if you want to but we're paying very close attention! 

Interestingly, the main GOP objection to TrumpDon'tCare is that it still cared about forcing Health Insurance Companies to provide minimum benefits to their customers.  That has now been removed by the White House and now the Insurance Companies don't have to do anything for anyone at any time – isn't that great?  As noted by Politico, however:

While altering the coverage requirements could help win over the Freedom Caucus members, it could drive away moderates — another coalition that House leaders need to build upon in the final 24 hours before the planned vote on Thursday. House leaders are still short of the 215 votes they need.

Image result for trump health care cartoonIt's going to be hard to bridge the gap because the bill still is not Draconian enough for the "Freedom Caucus":

Freedom Caucus members, led by Meadows, want at least some parts of Title One of the bill removed. Included in Title One are many of the Affordable Care Act's benefits, like a prohibition on insurers denying coverage over pre-existing conditions and a prohibition on lifetime and annual limits.

That's right, your pre-existing conditions can now stop you from getting coverage and, even if you are covered, there can be a cap – so don't get too sick or you'll be on your own!  Aside from leading to a great unwinding in the Health Care, Pharma and Biotech sectors, TrumpDon'tCare will put a huge burden on the bottom 99% and eat into their disposable income
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Weakening Wednesday – Trump Agenda Begins to Unravel

Where's my tax cut?  

The market is getting worried that TrumpDon'tCare is not only going to impoverish tens of Millions of Americans (bad for Retail) but that the fight over it will delay the things they really care about like MORE FREE MONEY in the form of lower taxes for the Top 1% and, of course, the dismantling of regulations as well as the regulatory agencies that are supposed to enforce them.  In short – where is our Gangster's Paradise?  

Fortunately, as members of the Top 1%, we are able to take full advantage of the chaos and the Biotech Short (IBB) from yesterday's morning Report opened at $4.45 and closed at $5.90 for a nice 32.5% gain on the day.  Of course that's nothing compared to the Monday morning Report's timely Tesla (TSLA) short, which was:

We're hoping TSLA goes higher but worried they won't so our trade for the moment is going to be:

  • Sell 3 TSLA April $265 calls for $9 ($2,700)
  • Buy 5 TSLA April $290 puts for $30 ($15,000)
  • Sell 5 TSLA April $275 puts for $19 ($9,500)

That nets you into the $7,500 spread for $3,300 so the upside potential is only $4,200 (127%) but, on the bright side, it's only 32 days away (April 21st) to expiration.  We only need TSLA to stay below $265 to collect the money and, if they go higher, we will roll our short calls to 6 May or June calls at higher strikes (the June $305 calls are $5 and the margin is $15,000 on 6 short ones)


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Testy Tuesday – 11,550 or Bust on the NYSE – STILL!

Treading water for two weeks.

On March 7th, I wrote: "Testy Tuesday – 11,550 or Bust on the NYSE" and yesterday the NYSE closed at 11,556.9 so no harm in waiting around for the Fed.  At the time we pointed out that declining volume was greater than advancing volume and that was still the case yesterday with 1.86Bn shares in decline vs. 1.15M shares moving higher in light trading but yesterday's action was tainted by a failure at the closing auction.  After-hours trading was suspended at 4:13 and all open orders were cancelled. 

It seems to be working again this morning but it's very scary when a major market system – THE major market system, fails on you.  If that had happened during a trading day – it would have been total chaos of the "flash-crash" variety.  Have I mentioned how much I love CASH!!! lately?  Hedges too!  

Our well-hedged Long-Term Portfolio is up over $9,000 since our 3/10 review despite the market not making any progress.  That's because we SELL risk to stock market gamblers using our system which teaches our Members to Be the House – NOT the Gambler.  Notice we are 75% CASH!!! (have I mentioned how much I love CASH!!!) but the positions we do have are on track to make $250,000 this year as they use options to both hedge and leverage the cash we do have in play.  You don't need to risk a lot to make a lot.

By selling risk premium, we don't need an up market to make money – flat or even slightly down works for us and anything less than slightly down kicks in our hedges and keeps us from losing too much.  You don't hit a lot of home runs following this strategy but your batting average usually leads the league!  

Image result for stock market balanceBalance is also key in this kind of market, we're slightly bearish overall, maybe 60:40 but we're moving towards 70:30, which is as extreme as we ever get in our positions.  If you
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Fed Speak Week – 11 Fed Speakers Aim to Steer the Markets

Let the manipulation begin!  

After a 0.25% rate hike did nothing to deflate the market bubble, the Fed will take another swing at things this week by speaking to us 11 times and it will be Evans (Dove), Evans (Dove), George (Hawk), Mester (Hawk) and Rosengren (Dove) on Monday and Tuesday followed by Yellen (Dove), Kashkari (DOVE), Kaplan (Neutral) , Evans (Dove), Bullard (Hawk) and Williams (Neutral) on Thursday and Friday.  So an edge to the doves but the doves had a 3:1 edge last year, so it's a change in tone towards hawkish for sure.  Kashkari was the dissenting voter who did not wish to raise rates at last week's meeting – he speaks Thursday at noon.  

In their recent statement, the Fed says "The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal."  The word symmetric was added since January and indicates the Fed is warning that they do not intend to let inflation move over 2% for any period – that should be clarified a bit this week and it's a key indicator that the free money party is really winding down. 

As we noted in our Friday Morning Report, the recent Fed action has driven the Dollar to the bottom end of its range, back to where we bottomed out at the Feb 1st meeting, after which we climbed back 2.5% over the next month and, unless the Fed speakers come off surprisingly doveish this week, we can expect the Dollar to rapidly move back to its mid-range at 101.50 and that will put pressure on commodities as well as the indexes.  

Oil (USO) is already under rollover pressure with 3 days to trade April contracts (/CLJ7) and already we're down to $48.50 ($47.90 on April) and we hit our $49.50 shorting goal on the May contracts (/CLK7 – also from Friday's report) so you are welcome for that $1,000 per contract winner to start your week off with a smile.  Our index shorts (same post) have had minor pay-offs so far but, as noted in the Report, we're confident enough in our index shorts at this point that we're beginning to short specific stocks ahead of a broad-market "adjustment."

As we expected, our
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TGIF – Fed Week Ends, G20 Begins

So far the markets are staying "strong".  

That's good for our longs, bad for our hedges but that's why we have both – along with plenty of CASH!!! on the sidelines – just in case.  Unfortunately, the Fed action, along with the out-of-control Trump budget, took the Dollar down 1.5% and that made the markets seem stronger than they actually are (because the currency they are priced in got weaker).  This also boosted commodites, which kept the materials and energy sectors from dropping and now we'll see if they can hold up as the Dollar comes off the floor at 100 (and yes, long USD at 100 is a good FX play with tight stops below).

Our target range for the Dollar is 100 to 103 so we expect to be back at 101.50 soon and THEN we will have a better idea of what the real reaction to the Fed was.  So far, as we predicted (and you are welcome if you took yesterday's index shorts for huge wins), the post-Fed rally has pulled back a bit but the Russell (/TF) still makes a good short at 1,385, especially if the Dow (/YM) is below 20,900 and the S&P (/ES) is below 2,380 and the Nasdaq (/NQ) is below 5,420 AND the Dollar is over 100.  

Today is option expiration day and quarterly expirations can be very tricky so a good day to take off and come back Tuesday (Mondays are pointless) to see what's up.  By the way, if you don't feel comfortable walking away from the markets for a few days – you REALLY need our help because a good portfolio should run itself – not run you!  

The weak Dollar has also pushed oil back to $49.50 into the weekend and, hopefully, they either test $50 today or hold $49.50 into Monday so we can short them again (/CL).  Again, since we don't think the Dollar is going any lower then, other than the US manipulation into the weekend – we don't see any reason for oil to be stronger.

Tesla (TSLA) is another short we are…
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Zero Hedge

"He Certainly Has A Story To Tell" - Statement From Mike Flynn's Lawyer

Courtesy of ZeroHedge. View original post here.

Hot on the heels of the WSJ report that Trump's former National Security Advisor, Mike Flynn, has offered to testify in exchange for immunity from prosecution, Flynn's lawyer, Robert Kelner of the law firm Covington, issued the following statement, in which judging by Kelner's language, Flynn's offer is not so much to "turn" on Trump, as to set the record straight, while putting an end to the ongoing "media witch hu...



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ValueWalk

Selling Your Data: The Vote To Deregulate Online Privacy

By Knowledge Wharton. Originally published at ValueWalk.

Wharton’s Kevin Werbach and New America’s Eric Null discuss online privacy.

http://d1c25a6gwz7q5e.cloudfront.net/audio/20170328A-KWR-Werbach-Null.mp3

Controversy continues to ramp up in Donald Trump’s presidency, with the latest debate spurred by a congressional vote that reverses landmark online privacy protections put in place during the last days of the Obama administration. While some experts say the problems with online privacy don’t loom as large as health care or immigration, the conflict surrounding what internet service providers can do with customer data is shaping up to be a hot-button issue that could take years to resolve. ...



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Chart School

Small Caps Advance

Courtesy of Declan.

There were small gains across markets, but it was the Russell 2000 which benefited the most. Today's gain managed to push past the 20-day and 50-day MAs on a fresh MACD trigger 'buy'.  Next up is a 'buy' trigger in the relative relationship between Russell 2000 and Nasdaq.


The S&P was up against resistance, but it managed to post a small gain to edge just above its 20-day MA. This move is enough to open up for a challenge of 2,400. Volume was better than yesterday, but there was no 'buy' trigger in bearish technicals.
...

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Phil's Favorites

Who feels the pain of science research budget cuts?

 

Who feels the pain of science research budget cuts? Not much science will get done without the money to fund people and equipment. Michael Pereckas, CC BY

Courtesy of Bruce Weinberg, The Ohio State University

Science funding is intended to support the production of new knowledge and ideas that develop new technologies, improve medical treatments and strengthen the economy. The idea g...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Earnings Elation Is Giving Trump Stock Bump Its Margin of Error (Bloomberg)

Mystified about how the Trump stock bump keeps surviving presidential setbacks? Look at a pillar of the trade that predates his election.

Huge range of sterling forecasts clouds horizon for Brexit talks (Reuters)

A company wanting to insure its revenues or financial investments against further falls in the currency could pay 4.8 percent on Tuesday, back to late 2015 levels, for "put" options that start generating a profit if sterling falls to $1.20.

...



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Kimble Charting Solutions

Energy Sector; Two Thirds chance they rally here

Courtesy of Chris Kimble.

Below looks at the performance of the S&P 500 Sectors, looking back 5-years. The winner for the lowest performance is the Energy Sector (-1.42%). XLE is lagging the S&P 500 by almost 70%, in just 5-years. “Time for them to rally?”

CLICK ON CHART TO ENLARGE

Below looks at the Energy ETF (XLE)/S&P 500 ratio over the past 17-years and why we find this pattern worth looking closer into.

...



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OpTrader

Swing trading portfolio - week of March 27th, 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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Members' Corner

More Natterings

Courtesy of The Nattering Naybob

[Click on the titles for the full articles.]

A Quick $20 Trick?

Summary

Discussion, critique and analysis of the potential impacts on equity, bond, commodity, capital and asset markets regarding the following:

  • Last time out, Sinbad The Sailor, QuickLogic.
  • GlobalFoundries, Jha, Smartron and cricket.
  • Quick money, fungible, demographics, QUIK focus.

Last Time Out

Monetary policy is just one form of policy that effects capital,...



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Digital Currencies

Bitcoin Tumbles Below Gold As China Tightens Regulations

Courtesy of Zero Hedge

Having rebounded rapidly from the ETF-decision disappointment, Bitcoin suffered another major setback overnight as Chinese regulators are circulating new guidelines that, if enacted, would require exchanges to verify the identity of clients and adhere to banking regulations.

A New York startup called Chainalysis estimated that roughly $2 billion of bitcoin moved out of China in 2016.

As The Wall Street Journal reports, the move to regulate bitcoin exchanges brings assurance that Chinese authorities will tolerate some level of trading, after months of uncertainty. A draft of the guidelines also indicates th...



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Mapping The Market

Congress begins rolling back Obama's broadband privacy rules

Courtesy of Jean Luc

I am trying to remember who on this board said that people wanted to Trump because they want their freedom back. Well….

Congress begins rolling back Obama's broadband privacy rules

By Daniel Cooper, Endgadget

ISPs will soon be able to sell your most private data without your consent.

As expected, Republicans in Congress have begun the process of rolling back the FCC's broadband privacy rules which prevent excessive surveillance. Arizona Republican Jeff Flake introduced a resolution to scrub the rules, using Congress' powers to invalidate recently-approved federal regulations. Reuters reports that the move has broad support, with 34 other names throwing their weight behind the res...



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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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Biotech

The Medicines Company: Insider Buying

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

I'm seeing huge insider buying in the biotech company The Medicines Company (MDCO). The price has already moved up around 7%, but these buys are significant, in the millions of dollars range. ~ Ilene

 

 

 

Insider transaction table and buying vs. selling graphic above from insidercow.com.

Chart below from Yahoo.com

...

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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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