by Phil Davis - September 19th, 2014 7:26 am
How, you may wonder? Well, two ways: Back in October of 2007, before Alibaba IPO'd in China, I was touting the company when it had an $8Bn valuation ($1.10 per share – pre-split). I was the first and only analyst in the US to point out the benefits of Yahoo's investment back then and our Members who play the Asian markets were able to take advantage of that and today should be the culmination of the white whale of investing – the 20-bagger as Alibaba is expected to IPO in the US at $160Bn just 7 years later.
YHOO, on the other hand, took the long and winding road but it should finally be getting to our $50 target and that's another 100% gain on the stock – though a very small consolation to those who didn't pick up AliBaba directly. Fortunately, at Philstockworld, we know how to BE THE HOUSE – Not the Gambler and, back in June, when the rumors of the AliBaba IPO began we came up with a way for our Members to make 400% playing YHOO into the AliBaba IPO.
From our Live Member Chat Room:
YHOO/Albo – Why not just buy YHOO? YHOO is $35Bn and owns 22% of AliB while SFTBY is $91Bn and owns 33% of AliB, so you get a lot more bang for your buck with YHOO, whose forward p/e is only 19, than SFTBY, whose forward p/e is about 17 – so not all that significant. Of course, more significantly is the potential impact of (guessing) $50Bn worth of AliB on a $35Bn company!
So we don't even have to go crazy if we want to play the "YHOO is undervalued" game. The Jan $38/45 bull call spread is $1.60 on the $8 spread with 400% upside if YHOO gains 28%. I think that's worth $800 for 5 shares in the $25KP
by Phil Davis - September 18th, 2014 8:24 am
S&P 2,000 – YAY!!!
OK, I'm cheating, that's what I wrote on August 26th, when we first hit that mark. At the time, everyone was in rally mode and our Big Chart looked like this:
Despite the HUGE rally signals, I remained skeptical (imagine that!) and said we needed to confirm 17,160 on the Dow and 11,000 on the NYSE before we even began thinking of looking for our real bullish goals of 1,200 on the Russell (the July high) and 17,600 on the Dow (the Must Hold line we have yet to have held). As I said at the time: "Until then, we need to be just a little bit cautious."
Turns out that cautious was a good play because, since then it was mostly downhill – until this week and our Big Chart now looks like this:
So you can see why we're not terribly impressed with this Fed-induced rally and we're not impressed with yesterday's silly spike – especially with such erratic action. On 8/26, I laid out my logic for you in the morning post and our shorting lines for the Futures were:
- Dow (/YM) 17,058, bottomed at 16,839 on 9/11 – up $1,095 per contact
- S&P (/ES) 1,995, bottomed at 1,968 on 9/15 – up $1,350 per contract
- Nasdaq (/NQ) 4,066, bottomed at 4,004 on 9/16 – up $1,240 per contract
- Russell (/TF) 1,165, bottomed at 1,135 on 9/16 – up $3,000 per contract.
As I mentioned in yesterday's post (and you can get these ideas delivered to you every morning, pre-market in addition to much more in our Live Daily Chat Room, by subscribing here) we called the dead bottom on Monday and we published our expected bounce lines for the week (in anticipation of a doveish Fed report) using our 5% Rule™, which were:
- Dow 16,980 (weak) and 17,010 (strong)
- S&P 1,985 (weak) and 1,990 (strong)
- Nasdaq 4,560 (weak) and 4,570 (strong)
- NYSE 10,950 (weak) and 11,000 (strong)
by Phil Davis - September 17th, 2014 7:37 am
Wow, what a recovery!
And wow, what complete and utter BS it is. They NYSE is still below 11,000 (our Must Hold line) and the Russell is still below it's 50 dma and we up on less than 10% of the volume (total) that sold off for the last two weeks. But, who cares as long as it paints a pretty picture?
We can thank the Wall Street Journal's Fed Whisperer, John Hilsenrath with yesterday's rally as he wrote not one but TWO articles that whipped traders into a frenzy on his "insider view" that the Fed "may keep the words "considerable time" in its policy statement." Oh, be still my heart! More free money? Really? Will wonders never cease?
Needless to say we took the opportunity to re-short the Dow Futures (/YM) at 17,050 and the S&P Futures (/ES) at 1,993 and the Nasdaq Futures (/NQ) at 4,060 and the Nikkei Futures (/NKD) at 15,950 – all of which we discussed in yesterday's Live Trading Webinar that was, sadly, a Members only affair (but you can join us here).
We also got a chance to short oil at $95 again (a level I published in yesterday's post) and we're thrilled with that and already this morning, it's back at $94.50 for $500 per contract gains. For non-futures players we grabbed the SCO Sept $30s at .25 as a fun play that inventories at 10:30 won't support $95 oil in much the way Fed policies at 2pm won't support these market levels. In fact, here's CNBC's Art Cashin telling you yesterday at noon what I told you pre-market, yesterday morning – BRILLIANT!
Art's actually one of the very few Wall Street analysts I respect (and not just because he repeats what I say), I've followed him since I was a kid – he's a fantastic guy and a lot of what I share with you – I learned from him. As you can see on the Big Chart, the Russell is the laggard and, if the indexes break higher – it's the index we'll go long on but our short bets (TZA) have…
by Phil Davis - September 16th, 2014 8:35 am
The charts are getting ugly!
Yesterday the Russell 2000 fell 1.2%, below the 50 day moving average and below the 200 day moving average which are about to form a "Death Cross", where the 50 dma moves below the 200 dma and is generally considered to be a bearish sign.
Of course, we've been telling you for weeks now that the markets were toppy but at least now it's getting obvious. The Fed may still pull a rabbit out of its ass and goose the markets once again but I very much doubt anything is going to stop the eventual correction now. Delay, maybe – stop, no.
Fortunately, we're well-positioned for this and our bearish, Short-Term Portfolio was up 50% on yesterday's dip while our bullish, Long-Term Portfolio held on to 21.2% of its gains for the year, giving us our best combined total for the year, even as the markets are pulling back. I'll be reviewing all of our Member Portfolios live this afternoon (1pm) in our Weekly Webinar (Members Only, but you can join right here). Our Members get trade ideas like this one (from our 9/2 Morning Alert):
If, however, you buy just $2,500 worth of the of the TZA Oct $13/16 bull call spread at $1 (25 contracts), they will pay you back $7,500 if TZA goes up about 15% (just a 5% move up in the RUT) AND they don't lose all their money until TZA is down 10% (a 3% move up in the RUT).
This is how we teach our Members how to hedge. As you can see, TZA crossed $15 yesterday and that spread is on it's way to a 200% gain already – a very nice offset against a relatively small drop in the Russell. This is how we can lean our portfolios just a little bearish and actually…
by Phil Davis - September 15th, 2014 8:32 am
More bad news today.
China's Industrial Output is at its lowest level since the 2008 crash and Hong Kong stocks dropped 1%, the 7th consecutive down day over there and the Royal Economists at the Bank of Scotland slashed their forecast for China as worries rise that the world's second-largest economy is headed for another slowdown. Too bad for them, they are just catching up to what we told you a month ago, on 8/18, when I said in the morning post:
Chinese Banks' Loan-Loss Reserves have fallen to the the lowest levels in 3 years — We shorted India last week (EPI) and now FXI has got my mouth watering as a potentially good short. I'd feel better about taking up a short on FXI at $45, not $42 but the Jan $42/38 bear put spread is just $1.80 on the $4 spread and that makes it very interesting as it pays 122% on a less than 10% decline in the Chinese markets – a nice way to hedge your bullish China bets!
As we expected, there was a little more gas in the tank but now we're right back on track as the magical China story begins to show its age. The benchmark index for the Asian region, the MSCI All Countries Asia Ex-Japan in U.S. dollar terms, is down 2.2% since reaching the year's high earlier this month. Saturday's weak economic data—including news that August electricity output fell 2.2%—suggest that earlier government stimulus measures lack staying power.
"The economy is losing steam very quickly in August," said Macquarie Group economist Larry Hu. "Previously when they stimulated the economy, private companies followed, leading to a restocking cycle. But this time, the private sector is so cautious." "The IP number is a surprise because Premier Li talked in Tianjin about a quite stable situation," said Mizuho economist Shen Jianguang. "I think, very soon, they're reaching a moment of truth. If they don't ease, the economic deceleration will come much faster."…
by Phil Davis - September 12th, 2014 7:20 am
12 failures so far.
12 trading days since the S&P first hit 2,000 (Aug 25th) in which we have failed to hold 2,000 for a full day. Not one and, unless the Futures pop 10 points before we open, not today either. On 10 of those days, we've had a late-day run-up on low volume that popped us over 2,000 and on 7 of those days, 2,000 held at the close but EVERY SINGLE DAY – it also failed to hold.
Let's not forget that, during this time, we've had TRILLIONS of Dollars of additional stimulus pledged by Carney, Draghi, Kuroda and other minor Central Banksters and Yellen has certainly been as doveish as she could by (while still tapering our existing Trillion Dollar stimulus). This is how our market behaves WITH Trillions of Dollars of cash being pumped into the Global economy – I wonder what will happen when it stops?
Of course, maybe it won't stop but, if it doesn't, this chart will look even uglier. This is a chart of our projected net annual interest payments on our debt in 10 years. That's $880 BILLION Dollars each year, just in interest payments, up $650Bn from the $233Bn we are spending now.
That's WITHOUT additional stimulus so I guess we can go for a bit more and make it an even Trillion, right? These are what we used to call CONSEQENCES – back when we used to care about such things. The US is not the leader in debt issuance, not by a long shot. Japan is 150% more in debt than we are and China has now doubled our debt to GDP ratio, after having been a creditor back in 2007 but now the undisputed king of stimulus spending.
Europe is also a mess. As I said to our Members in an early-morning Alert: Another thing the US Media is purposely ignoring is the 12.5% correction in Europe (example on Germany chart) since July that, so far, has bounced weakly (4-point drop on EWG has weak bounce at 28.8 and strong at 29.6) – failing exactly…
by Phil Davis - September 11th, 2014 8:30 am
We're back in business baby!
It's been 12 years since GW Bush first assembled the "Coalition of the Willing" in November of 2002 (a full year after we were attacked by 15 Saudi hijackers), to go after Osama Bin Laden, (who was hiding in Afghanistan) by attacking Iraq. Interestingly, Bush only stole that phrase from Bill Clinton (what, you thought Bush had an original thought?), who first mentioned it in a 1994 interview.
Now, in 2014, we're ready to go back to war – in Iraq (did we ever really leave?) – with another coalition of the willing staring most of the same players but this time, we have Germany on our side – so you know we're serious. According to the WSJ, they've already spotted a training camp for Syrian rebels in Saudi Arabia and – oops, wait – that's being run by us – WE'RE arming and training Syrian rebels – what can go wrong?
Well, as they say, politics make strange Bedouin fellows and I guess we'll ignore the fact that the current ISIS rebels were the same people we armed and trained to fight Saddam 12 years ago. While we're training and arming Syrians in Saudi Arabia, we'll be bombing their country as well. Again, this is pretty much how we handled Iraq but hey – at least we're consistent!
At PSW, we're consistent too. While we love war as much as any other red-blooded Americans, we question this one as well – even when there's a Democrat in charge. It's funny because, just the other day, I suggested that Congress, rather than rejecting the call for $40M to help combat Eblola (as they just did), could have scraped together that money by simply firing one less $1M Tomahawk missile each week. I was wrong, and I apologize – it turns out they cost $1.41M each.
by Phil Davis - September 10th, 2014 8:32 am
What a fun market to play!
Yesterday, in our Live Member Chat Room (you can subscribe here), at 11:13, in anticipation of a wierd day, I put up a bullish and a bearish trade idea for our Members. The cool thing is, both sides won! Our two trade ideas (which we went over in our Live Webcast at 1pm) were:
If you want to play for an AAPL pop this afternoon, the QQQ weekly $100 calls are just .40 and QQQ topped out at $100.33 yesterday. Figure AAPL pops 2.5% and that pops the Nas and QQQ 0.5% so $100.50 + premium could be good for 50% if AAPL gets a good reaction – if not, it's probably going to lose less than a direct play on AAPL would.
TZA/Sn0 – Well TZA is only at $14.50 so the spread is half in the money at net $1.25 so it still has good upside if you add to it but I'd rather get the Jan $15/20 bull call spread at $1 as that gives you more time and more upside – if your TZA hedge goes in the money. That way, you can take $2 off the table on the Oct spread and know you still have plenty of upside if TZA keeps going up on you and also less downside exposure if it flips the other way.
When our 1pm Webinar started (at the same time Apple's conference started), the QQQ calls were just 0.42 and still playable and, as you can see on the chart, we even had a dip down to 0.30 briefly but that line held and we then jumped 100% back to 0.60 and then on to 0.72 before dropping back to 0.60, where we took our expected 50% gains and ran.
If you missed our Webcast yesterday, you should check out the replay because we discussed WHY we made that particular pick and HOW we selected it – very educational! That's because, at Philstockworld, our goal is to TEACH you to be a great trader – not just give you great trades.
by Phil Davis - September 9th, 2014 7:46 am
Today is the day.
There’s a lot riding on Apple’s massive iPhone 6 and iWatch event. Since the first iPad in 2010, the big question on everyone’s mind has been “what comes next?” Apple updates its lineup on a fairly predictable schedule, but products that push the company into entirely new categories have been few and far between.
That hasn’t hurt Apple financially by any stretch; in fact, it continues to make more on each device it sells than just about anyone. Still, a constant stream of promises from Apple’s top execs have drawn out the idea that something big is just around the corner. That something big is very likely making its debut at Apple’s event next Tuesday, which kicks off at 1pm EST / 10am PST and we'll be covering it live today during our Live Trading Webinar (1pm EST).
On top of the rumor pile are expectations for:
- Bigger IPhones (to go after Samsung market share) + 10%
- NFC and Mobile Payments (transaction revenues) + 20%
- iOS8 (pushing iCloud) + 5%
- iWatch (new product) + 20%
- Apple TV (home integration) + 10%
So those are the most likely announcements and they have the POTENTIAL (if all goes well) to add 65% to AAPL's already massive market cap. Just enough, in fact, to make AAPL the world's first $1Tn company in 2016. We're already playing AAPL bullish in two of our PSW Portfolios but we have been since they were $450 ($64 post-split) and we're already up 50% (AAPL was our Stock of the Year selection), so we hedged a bit at $105.
The question for us is – do we remove those hedges in anticipation of AAPL's 2 consecutive 30% annual runs that we are predicting but, with AAPL already up 25% this year at $100 and having already been rejected at 30% ($105), we're keeping our partial cover – at least until we see the public's reaction to the new product line.
by Phil Davis - September 8th, 2014 7:41 am
Sure you do, this was Friday's intra-day chart of SPY, the ETF that tracks the performance of the S&P 500. It's pretty similar to what happened every day last week, with a high-volume (relatively) sell-off followed by a recovery on almost no volume into the close, giving us the impression that the markets are flat.
Only Friday was a bit different. On Friday, the market manipulators were so desperate to close the week on a high note and so greedy, that they also got sloppy and now we have some very clear evidence of what complete and utter BULLSHIT this market is:
What do we see here? Despite a 0.45% rise in the S&P and a 0.39% rise in the NYSE, 0.4% in the Dow, 0.45% in the Nasdaq and 0.25% rise in the Russell, the FACT is that there were FAR MORE shares DECLINING than there were advancing. In fact, on the NYSE MKT (what used to be called the AMEX), declining volume outpaced advancing volume by 115%. 115%! Yet we get a 0.4% RISE in the index?
On the NYSE itself, 2,079 stocks declined while only 1,057 (33%) of the stocks advanced and there was 56% more volume to the declining shares than the advancing shares yet, MIRACULOUSLY, 160 NYSE stocks made new 52-week (and, often, all-time) highs while just 30 made 52-week lows. That's 84% positive! Isn't that amazing? Isn't that UNBELIEVABLE???
It is unbelievable, as in – something that should not be believed by intelligent people. When you see a magician on stage sawing a woman in half or levitating – you might be amazed at what a good trick it is but you don't start believing in magic, do you? What if that magician asks you to bet your retirement on the fact that he is really levitating people or that his assistant can medically be cut into pieces and reassembled?