Phil's Newsletter

$1,000 Thursday – Our Futures Shorts Finally Pay Off!

What a crazy market!  

On Tuesday, in the morning post, we put our foot down and called for index shorts in the Futures, saying:

And THAT is why we're short the market here.  That's why we're short the S&P Futures (/ES) below the 2,200 line (with tight stops above) and Dow (/YM) 19,100, Nasdaq (/NQ) 4,875, Russell (/TF) 1,330 and even the Nikkei (/NKD) at 18,500 – because that same economy also can't sustain an ever-rising Dollar.

In fact, we called an audible in our Live Member Chat Room at 10:15 to catch the Russell short at 1,335 so really it was a $1,500 per contract gain for our Members but not a bad gain for you free readers either, more than enough to buy you a subscription so you don't miss those extra $500 moves next time, right?  The adjustments I suggested to our Members in the morning were:

Oil stocks jamming up the indexes but there's an undercurrent of selling so good shorts at 19,200 (/YM), 2,212.50 (/ES), 4,880 (/NQ) and, of course, 1,335 (/TF).  /NKD is no good because the Dollar is rising, now over 18,500 but very tempting to short.  

The Dow (/YM) dropped to 19,120 for a $400 per contract gain and the the S&P (/ES) hit 2,195 for an $875 per contract gain and the Nasdaq (/NQ) fell to 4,805 for a $1,500 per contract gain so not bad for a day's work!  In yesterday's Live Trading Webinar, we flipped to the Nikkei (/NKD) shorts, as they had the farthest left to fall and, of course, we are still liking the oil shorts (/CL) once the squeeze is over, as we test $50.50 this morning.

Watch for Brent (/BZ) to fail $52.50 and that's game on for the /CL shorts but no shorting above those lines.  We caught a $1,000 per contract drop off our first test at $50 yesterday but overnight oil got jammed up again at the Asia open (as they had to square off their accounts at…
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WTI Wednesday – Oil Jams Back to $50 on OPEC BS

Image result for you can fool some of the peopleYou really can fool some of the people all of the time!  

As wisely noted by the great George Bush II, there are some people you can count on to be fools and those people have put their money into oil over and over and over again since September on the same idiotic news that OPEC will cut production from 33Mb/d to 31.5Mb/d.  Since that time, the OPEC members have INCREASED production to over 34Mb/d and the plan is to cut back to the more sustainable 31.5Mb/d and claim victory (and we are long oil in our Options Opportunity Portfolio, expecting it to work out for them).

This morning, Iran's oil minister said Russia will be on board with a 1.4Mb cut (total) and that will bring them down to 32.5Mb/d, which is 1Mb/d HIGHER than what they said in September but what difference do facts make in post-election America?  Just last night, the American Petroleum Institute (API) reported a  weekly 2.3M barrel surplus of Oil (/CL) at Cushing, OK along with a 3.36Mb surplus in Gasoline (/RB) and a 2.24Mb surplus of Distillates – and that's after a holiday weekend, when demand was supposed to pick up.

Stock price graphsAs you can see from this chart of our oil inventories, we are already nearly at full capacity, more than 10% over the top of the range that was set last year and, if EIA confirms the API build at 10:30, $50 oil will be a nice shorting spot because the US alone has a 50Mb surplus vs last year so – even if OPEC where our only supplier, it would take months just to work off our own massive surplus – and that's assuming US producers don't rush in to fill any production gap OPEC leaves on the table. 

Aside from OPEC, it's a big data day on the last day of the month and we expect all hands to be on deck to prop up the markets and close November at those all-time highs so your friendly neighborhood bankster has some nice-looking charts that they will be able to use to pressure you to make "tax-advantaged" moves…
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Testy Tuesday – Will S&P 2,200 Hold on Real Volume?

The low-volume rally comes to an end – now what?

As you can see from this chart of On-Balance Volume, there's been a HELL of a divergence between it and the S&P and, in the end, OBV usually wins out.  OBV is a momentum indicator that uses volume flows to predict price and it's generally very accurate – except when certain key stocks are being propped up in order to create the illusion that there is index strength when, in fact, the people manipulating the market are dumping everything else they hold into the greedy hands of the retail suckers.  Then it looks like this.

Maybe this time is different, right?  Like last fall, when OBV tanked in November and the market didn't collapse in November or December – it collapsed in January, falling from 2,100 to 1,800.  That's only 14% and we're up 7% since Trump was elected so a net loss of just 7% from where you were before the election is no reason not to BUYBUYBUY expensive stocks now, is it?  At least that's what the stock pushers are telling us on TV and they are on TV – so they couldn't be lying to us, could they?

Image result for us wage historyRemember the great bull markets of the 50s and 60s or the late 90s?  What did they have in common?  Rising wages!  Rising wages are the foundation for sustained economic growth and we're simply not there yet and you KNOW what happens when wages stagnate and prices rise, don't you?  Assuming you are not having this article read to you, you were on the planet 8 short years ago when we last suffered the consequences of things rising to the point at which people could no longer afford them.

And by people, of course, I don't mean you – you are in the investor class and you have something 80% of the people in this country do not have, which is MONEY!  You have money in your checking account and money in your savings account – in fact, you have SO MUCH MONEY that you are able to plan for your future – very much unlike 240M of your fellow countrymen.  

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Monday Market Makeover – Trump Says Millions Voted Illegally, Recount Begins

Image result for trump vote recountThis is strange.

Trump claims millions of people voted illegally and is using that argument to claim that a recount of the election results is not necessary.  Fortunately, he doesn't have his finger on the button just yet and there will be a recount in 3 states (MI, PA and WI)  and, though it's not likely to change anything in the end, it's likely to cause a bit of market turmoil – in addition to everything else that's going on.

Imagine if the election is overturned and the entire 10% Trump rally evaporates overnight – that would be interesting.  Nothing to worry about so far as we've made it to end-of-month window-dressing time and it's very unlikely "THEY" will let the markets drop away from record highs to close out November but December is going to be trickier as we have that Fed meeting on the 14th and this week already we have 7 Fed speakers to pave the way to the anticipated hike:

As you can see, just the Dallas Fed on the calendar this morning but then things heat up quickly as we get our 2nd estimate of 3rd Quarter GDP tomorrow after the hawkish Fed VC, Fisher has his say but Dudley cleans up after the data and then we see how confident the consumers really are.  Friday is non-Farm Payroll but first we have to get past the OPEC meeting on Wednesday and there's another part of the recent rally that might reverse hard and fast if no deal is reached.  

As you can see from the earnings calendar, we've pretty much run out of interesting companies to watch so the data becomes more important this time of year, until the earnings cycle starts again in January.  

Fortunately, our friends at Goldman Sachs were kind enough to lay out a roadmap for us that takes us all the way through 2017, where the firm predicts we'll finish as 2,200 on the S&P which, unfortunately, is 13-points LOWER than we closed on Friday.  In fact, our Q1 S&P projection is for 2,125, down 4.2% from where we are now but clearly
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High-Flying Friday – Dow 20,000 in Sight!

Dow 20,000?  

Why not, nothing is out of bounds now that investors have shown they are prepared to accept insane valuations for stocks.  We're still skeptical and very well-hedged (and our hedges are getting crushed) but it's more than offset by the ridiculous gains in our long-term positions so party on Trumpmerica!

As you can see on the chart, we came off the 10,000 line in 2011 rose 75% to 17,500, pulled back to 15,000 (33% retrace) and now we're on the road to 20K in one mighty leap since the election, adding 1,000 points since election day – not even counting the 500-point sell-off that occurred right before the rally began (blow-off spike down).

The 5% line off 18,000 was, of course, 18,900 and you can see we had a brief pause there before shrugging off resistance and heading higher.  The 7.5% line is 19,350 and not too much upside resistance there and then it's a hop, skip and a jump to 20,000 – no problem! 

In fact, the Russell 2,000 is just under 1,350 and that's up 200 points since early November (not counting their spike down) and that is just shy of 15% so the Dow is MILES behind if the move in the Russell is real (we have bet it is not but those bets are killing us!).  The Nasdaq is up 4.3% and the S&P is up 5.5% and the NYSE, the broadest index, is up 4.8% so it's really the Russell that's a huge outlier – and that's why we're shorting it.

HOWEVER, we could be (and have been) very wrong about the Russell and, if so and it heads higher still, then it's the other indexes that should be catching up so we can hedge our hedges with long positions on the Dow, S&P and Nasdaq.  For example, the Dow ETF (DIA) is at $190 so a 5% move in the Dow would be $199.50 and we can make the following play to gain leverage:

  • Buy 30 DIA March $188 calls at $6.70 ($20,100)
  • Sell 30 DIA March $193 calls ar $3.75 ($11,250)
  • Sell 5 AAPL 2019 $97.50 puts for $10 ($5,000)

This spread requires a net cash outlay of $3,750 and the spread pays $15,000 back…
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Will We Hold It Wednesday – S&P 2,200, Dow 19,000

All-time highs! 

Last time all our indexes hit all-time highs together was back in good old 1999 and that party was never going to stop either – unitl it did, of course.  The pullback in 2000 wasn't even that bad, if you don't count the silly run to 5,000 on the Nasdaq that made no sense, then the pullback from 4,000 to 3,000 was very normal – it was only the crazies that bought stocks up at Nasdaq 5,000 that got really burned….

Of course, that Nasdq wasn't the same Nasdaq we have today.  There is no more (Amazon delivers our pet food), there is no more WebVan or Kozmo (Amazon delivers our groceries) and, of course, there is no more Books-a-Million (yep, Amazon). 

Image result for amazon p/e history 2016Aside from Amazon, who lead the overpriced team in the new bubble with market cap that is 179 TIMES their projected (forward) earnings, other survivors of the crash of 2000/2001 are AAPL, HPE, IBM, MSFT, GOOGL, INTC, CSCO, ORCL and IM, who are especially notable as they actually compete with Amazon yet they still survive.

So clearly it is better to be a company that actually makes stuff – especially stuff that other apsiring tech companies buy from you.  For AAPL, it's tech employees who buy there stuff and for GOOGL – they advertise all the stuff people are trying to sell you.  Yet AMZN has a $373Bn market cap – bigger than all the stocks put together back in 2000! 

Amazon was coming back to reality before the election but now it's off to the races again and, while we're not worried about our Jan $900 short calls we sold for $8.10 the last time AMZN popped (now $1.98 so we're up 75%), it is getting interesting again as a short for those brave enough to point and say "Emperor Bezos has no profits!"

Well, they do have profits but they are all in their cloud storage division – the rest of the business is actually running at a loss this year.  Anyway, it's an interesting stock to short.  I favor the April $850 ($90)/780 ($50) bear puts spread at net…
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$2,100 Tuesday – Gasoline Futures Pay off Bigly (Again)

Yep, we did it again.

In yesterday's post, I noted that Gasoline Futures (/RB) were taking off, as they crossed the $1.35 mark and said our target was $1.45 and they already hit $1.40 during yesterday's session and it came so fast that we took the $2,100 profit per contract and ran, missing this morning's pop to $1.43 but hopefully we'll retest $1.40 for another entry (and another $2,100).  

We're now into real profits on Gasoline Futures as we clawed back from our intitial loss with huge wins on Monday (+$1,875 per contract), Tuesday (+$1,875 per contract) and Thursday (+$420 per contract), where I said in Friday Morning's post: "Hopefully we'll pop over $1.35 (from $1.33) and run up from there.  

We laid out our long premise for gasoline almost 3 weeks ago, right in the morning post:

So more people working making more money means more driving yet Gasoline Futures (/RB) have plunged to $1.39 this morning because that pipeline fire that caused prices to spike (which we shorted) earlier in the week, is already fixed but now we like /RB long because more workers = more drivers and we have the Thanksgiving Holiday coming up and that's a big demand holiday.  We made a quick $500 yesterday on a pop off the $1.45 line so this, of course, is a much better entry but it's a scary, volatile contract that makes or loses $420 per penny move!

It's those boring FUNDAMENTALS that make plays like this possible and the next Funamental Issue we're tracking is the very low volume that this "rally" has been trading on and that means there's no real support for this sudden $5 TRILLION surge in market valuation so, when people do finally decide it's time to take profits – there won't be any buyers and we can drop back very, Very, VERY fast.  

How are we playing that?  Well we talked about…
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Monday Market Movement – The Trump Rally Continues

Up and up we go.  

If we knew voting for Trump was going to be this good for the markets, we would have doubled down on our longs.  As it is, our Long-Term Portfolio gained $98,471 since Nov 6th and that's 20% in 15 days so thank you, Mr. President!

Of course our Long-Term Portfolio is all long, protected by our Short-Term Portfolio, which lost $10,968 (11%) on our hedges but not so bad as the net is still up $87,503, which is a gain of 14.5% in 15 days in our paired portfolios (we began with $500,000 in the LTP and $100,000 in the STP).  Our self-balancing Options Opportunity Portfolio gained $7,843 (7.8%) over the same period and our well-hedged Butterfly Portfolio gained $16,100 (16%) – actually our best overall performer – even though it's our most conservative. 

As you may have noticed, I've been banging the table on Gasoline Futures (/RB) and that finally took off this morning, breaking towards our $1.45 target.  Natural Gas (/NG) hit $2.95 and that's a "take the money and run" level as $3 is going to be hard to break and the cold weather on the East Coast that's goosing the contracts will only last this week and then it's back to warmer than usual weather. 

Speaking of weather, we figure out why Warren Buffett changed his mind on airlines and it's because of the weather.  NASA just launched a very advanced satellite that will do for weather what Hubble did for astronomy and will improve our forecasting ability by leaps and bounds.  That's going to benefit the arilines, a business where every penny counts and knowing where the storms are going to be can save them Billions.  The current NOAA satellite is 40 years old!  

More accurate weather info can help airlines plan better and save Billions of Dollars and that's right to their bottom line.  United does $40Bn in sales and drops $3Bn to the bottom line (9%) so even a 2% increase in operating efficiency is about another Billion for them and a 33% increase in net income.  Now THAT makes sense as a Buffett play.  

While it…
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Friday Falling Dollar Foolishness – OPEC Deal Rumors Right on Schedule

Down goes the Dollar!  

That's significant because it's Options Expiration Day today AND we're settling the December Oil Futures Contracts (/CLZ6) so the well-timed 0.5% drop in the Dollar (which we predicted – thank you!) is boosting oil, gold, the indexes – well everything priced in Dollars – you get the idea.  This is how they take advantage of TA people because TA doesn't take into account the value of the underlying currency of the thing they are charting.  

Image result for technical analysis voodooTo illustrate how silly that is, suppose you were charting the freezing temperature of a water and they kept changing the type of liquid but you just kept putting lines on the chart as if it were water all along.  

A person looking at the chart would believe the freezing temperature of water varies wildly and they would come up with all sorts of idiotic reasons to explain this and, if there was a market for betting what temperature water would freeze at, they would start naming the chart patterns and selling you analysis that claims to give you the inside edge to bet what temperature water would freeze at tomorrow.  

Does that sound idiotic?  Well that's Technical Analysis!  Water freezes at 32 degrees F and that's a F'ing FACT, not a theory.  F is also the first word in Fundamentals – where we deal in FACTS, not theories.  You can't ignore a massively significant FACTOR, like the price of the Dollar and expect to accurately chart the movement of something that is priced in Dollars.  

Of course, at PSW, we are Fundamentalists and we do take these things into account, that's how we knew to go long on Gasoline Futures (/RB) at the $1.325 line this morning – based on the chart AND the chart of the Dollar AND the expectation of a rumor from OPEC we discussed in yesterday morning's PSW Report.  We've been in and out of /RB all week and, at 3:24 pm in our Live Member Chat Room, I said:

RUT/Jasu – Still 6 short

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Federally Failing Thursday – Can Yellen Save the Markets?

Related imageWill we still have Janet Yellen to kick around next year?

Almost certainly we will because her term as Chairman of the Federal Reserve doesn't expire until February, 2018 but, even if she is not re-appointed as Chair – she's still a Governor until 2024 and Trump has no ability to remove her.  Likewise, Fisher remains vice-chair through June of 2018 and his Governorship lasts through 2020 and there are only 7 Governors with two open slots because, like the Supreme Court, Congress has refused to confirm any of Obama's picks for replacements (yes, they are that petty).  So now it's going to be up to Trump to confirm 2 new Fed Governors but it will be many years (past his term) before it's likely to have any real influence on the Fed. 

And you've heard the expression "don't fight the Fed", right?  Well that goes for Presidents too because the Fed represents the nations' bankers, not their voters and you cross the money-men (or women) at your own great peril.  Janet will get a chance to tell us about it today as she begins her two-day testimony to Congress.  It's a great day to short the market (same levels as yesterday) as you can expect questions from Democratic Congresspeople like "Just how insane is Donald Trump's economic policy and how much damage will it do to our country?" – stuff like that…

Of course, Yellen will attempt to remain bi-partisan and pretend she doesn't know what programs he's proposing and will even pretend she can't do math and, hardest of all for a grandma from Brooklyn, she will pretend she has no opinion on the subject – it's going to fun!  Fun, but it will come off as uncertain and confusing to those watching and you really don't want to see that when you are holding stocks at the top of the market rally. 

Yesterday we thought 2,180 would not hold on the S&P Futures (/ES) and, of course, they did not but, in our Live Trading Webinar yesterday afternoon, we decided to short the Russell (/ES) and we're currently short 6 at 1,302.8 so we'll see how that plays out.  

Our gasoline longs from
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Greece - What Comes To Mind?

By Capitalist Exploits. Originally published at ValueWalk.

I warn you… I’ll get hate mail for this. I am a bad person.

Perhaps, I spent too much time in European cities because Athens and Greece in particular always failed to impress me.

Ok, they have a lot of crumbly buildings. But so do every other country in the region. Ephesus is more impressive than the Panthenon. The Colosseum more impressive than the Valley of the Temples.

And then there’s the food. It’s terrible. Leaves or cheese, sometimes both, double soaked in oil pretty much sums it up.

If you’re not into crumbling buildings, they offer the islands, which are quite nice, laid back, and fun with those little hilltop villages you see in the postcards, riddled with cobbled streets and fat ladies with missing teeth, smiling at you.

Unfortunately, all ...

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Zero Hedge

How the Government Conditions Citizens to Obey

Courtesy of ZeroHedge. View original post here.

Via The Daily Bell

Can you count how many ways the government manipulates people to be the type of citizen t...

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Phil's Favorites

Trump Made Calls to Two High Law Enforcement Officials with Jurisdiction to Investigate Him

Courtesy of Pam Martens.

Preet Bharara

Former FBI Director James Comey has testified to Congress that he was uncomfortable with the multiple contacts by the President. Comey was fired by Trump after declining to give a pledge of loyalty to the President. Now, official government emails have been released documenting that another top law enforcement official with jurisdiction to investigate Donald Trump and his business associates received “uncomfortable” contacts by the President and was then fired after declining to return a phone call.

Yesterday evening, Jason Leopold and Claudia Koerner, reporters for Buzzfeed, ...

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Insider Scoop

Marveling At Multi-Factor ETFs

Courtesy of Benzinga.

Related This Goldman ETF Keeps Growing Getting Smarter About Smart Beta Related ... more from Insider

Digital Currencies

Bitcoin In Perspective: Bill Gates Worth More, Gold 200 Times More

Courtesy of Mike Shedlock, MishTalk

An interesting article on HowMuch puts the Bitcoin phenomenon into proper perspective.

Google founder Larry Page’s net worth beats bitcoin’s entire market cap. Microsoft founder Bill Gates’s net worth is double Bitcoin.

Please consider The Bitcoin Economy, in Perspective.

Last year, Bitcoin became more stable than gold, and earlier this year, the price of a Bitcoin surpassed that of an ounce of gold for the first time. Currently, all the bitcoin in the world is ...

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Chart School

Crude oil how low will it go? - Update

Courtesy of Read the Ticker.

The most recent price action in crude suggests that those that were long have re adjusted their positions for a downswing.

In our previous post our lower targets are:

Click for popup. Clear your browser cache if image is not showing.

Notice how the current price action in crude has been seen before a plunge in price.

Click for popup. Clear your browser cache if image is not showing.

Why is this happening?

Short answer, to...

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Even though genetic information is available, doctors may be ignoring important clinical clues

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

Even though genetic information is available, doctors may be ignoring important clinical clues

Courtesy of Greg HallCase Western Reserve University

Digitized strand of DNA. Mathagraphics/From

With the availability of home genetic testing kits from companies such as “23andMe” and “Ancestry DNA,” more peo...

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Swing trading portfolio - week of June 19th, 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

Frontier laid off state Senate president after broadband vote it didn't like

Courtesy of Jean-Luc

Speaking of FTR – not nice people…

Frontier laid off state Senate president after broadband vote it didn’t like


Broadband provider Frontier Communications recently laid off the West Virginia state Senate president after a vote the company didn't like—and yes, you read that correctly.

West Virginia does not have a full-time legislature, and state lawmakers can supplement their part-time government salaries ($20,000 a year,&...

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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!

[For more information on NewsWare, click here. For a list of prices: NewsWar...

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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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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.


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.

Market Shadows >>