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Phil's Newsletter

Will We Hold It Wednesday – S&P 1,880 Edition

SPY 5 MINUTEWhat a recovery!

Things are so good, they could hardly be better – as long as we ignore the non-existent volume that this house of cards is being built on, of course.  80M shares traded on SPY is half of the volume we got during the sell-off but it doesn't take 2 up days to make up for one down day – not at all.  In fact, it's only taken 5 up days with a total of 548M shares traded to erase 6 prior days of declines in which 860M shares were traded to the down side.

Still, we have to respect the phony technicals while they last and it's not like we're not willing to play along.  Our Long-Term Portfolio remains very bullish, as we only expected a short-term correction anyway, and has jumped $13,000 (2.6%) since last Thursday's review.  So GO MARKETS, from that perspective.  We don't care if it's a fake rally – as long as we can make some real money trading it, right?  

Yesterday we did a Live Trading Webinar (replay available here) where we reviewed a dozen bullish trade ideas in 90 minutes and today, at noon (EST) we will do a special presentation expanding on our "7 Steps to Constistently Making 30-40% Annual Returns" featurning two additional trade ideas and you can sign up for a FREE CLASS RIGHT HERE.  Here's the intro video: 

And what is step one of our 7 step program?  Wait for a sell-off!  Well, we just got one and that's why we found lots of things to buy.  Despite our Long-Term Portfolio's impressive gains over the past two days, it's still playing catch-up to our Income Portfolio, which is up 7% for the year because we cashed it out at the top in March and now we are able to go on a shopping spree, picking up things that have gotten cheap in the recent sell-off.  

The S&P may have come roaring back but it didn't bring everything back with it.  CMG, for example, is still down 20% after an earnings disappointment but people…
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Testy Tuesday – Yesterday’s Volumes Made Monday Meaningless

SPY 5 MINUTECheck out this chart from David Fry:

65M was the total volume for SPY for the day and, as you can see from the volume bars, almost all of that came early in the morning, followed by a dead afternoon in which we drifted higher on NO volume at all.  Nothing has changed, it's the same manipulated BS we had at the beginning of the month – only now at much lower volumes

How can we change our minds about stocks when the data we're looking at is statistically insignificant?  What is statistically significant is the Chicago Fed's National Activity Index – one of the most reliable indicators of GDP – and it's pointing down yet again.  The CFNAI is a composite of 85 monthly indicators measuring all sorts of things like Manufacturing, Sales, Inventories, Prices, Shipping, etc. and, this month (March) 34 of them were negative.  Sure that means 51 were positive but the net was 0 and AGAIN, I ask you, is that the kind of data that we should be paying all-time high prices for stocks against? 

Click to View

I'm not saying the economy sucks.  In fact, it's fantastic for the top 10%.  I'm just saying that it's NOT the kind of broad-based recovery that makes me want to place long-term bets at 20+ multiples of earning because, as we discovered in 2008, those earnings projection can quickly turn out to be nothing but BS and the very last people to see it coming are the CEOs and CFOs who make those projections.  

As earnings reports are coming in, we're getting mixed signals.  85 of the S&P 500 have reported so far and 67% (57) have beaten on the revenue side, which sounds nice but it's below the 73% average and usually 58% beat on revenues (not that great, actually) but, so far, just 51% are over the line.  Half, that's half.  That means half the companies reporting are FAILING to make earnings – even with lowered expectations (the weather, late Easter, Bitcoin, Ukraine, Flight 370 – pick an excuse).  


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Smart Money Monday – All Out or More to Go?

Check out this chart:

This has been the flow of Bloomberg's "Smart Money Flow Indicator" and, as Zero Hedge wonders:  Just who is soaking up what the smart money is selling?  Company Buybacks, Johnny 5 (tradebots) or the Greater-Fool Retail Investors?

What is clear is the institutional investors, the so-called "smart money" are dumping shares like there's a crash – only there isn't any apparent crash – the indexes are pretty much holding on fine, making their losses back on low-volume days while steadily selling off on higher-volume days, which needs to a massive net outflow of "smart money" replaced by a steady supply of "dumb money". 

Of course, there's no money dumber than the Fed, who buy and buy and buy and buy and then, when it's hard to remember a time when they weren't buying – they buy some more.  

Rather than show you the Fed's $4Tn balance sheet again – let's take a look at where the money went.  Oh, there it is – right in the banks balance sheets!   The Fed has essentially borrowed money, on your behalf, and GIVEN it to their member banks at 0.25% interest (ie. FREE) who CLEARLY are not lending it out.  

Screen Shot 2013-02-27 at 10.33.47 AM.png

And why should they?  They can simply turn around and buy TBills by leveraging their cash 10x (banks can do that) and collect 3% for 10 years X 10 = 30% while the Fed charges them 0.25% for a 29.75% annual profit on every dollar.  Why then, should they lend it to you?  Why should they offer you interest on your deposits when the Fed gives them all the money they want for free?  

Banks USED to perform an important economic function that would save and protect your hard-earned money and your money was then lent out to other hard-working people so they could buy homes and cars and invest in businesses.  Not any more, now banks only lend to Corporations and people with pristine credit (auto companies have to do their own lending), although they do let you buy things…
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Thank Yellen It’s Thursday!

What a turnaround!  

We knew Yellen's speech yesterday would boost the markets but – WOW!  We didn't have to hear what she actually had to say, of course, the Futures popped the S&P up to 1,855 and we finished the day at 1,862, well over our strong bounce target for the week (see Monday's post for details).  

Since the week is ending today, all they have to do is hold 1,850, along with Dow 16,240, Nas 4,150 (not there yet), NYSE 10,430 and Russell 1,145 (oops) and we're back in bullish business.  

So, we have a couple of laggers – is that the end of the World?  Maybe – and, since it's a holiday weekend, I think we're going to hold off on our BUYBUYBUYing until we get the all clear next week.  Meanwhile, it's not like we're sitting on our hands.  In our Live Member Chat Room we like to do earnings plays and yesterday we picked SNDK and went with the May $80 calls at $1.55 with SNDK at $76.19.  Earnings were great and, pre-market, SNDK is heading for $81, which should give us at least a double for our day's work.

Even more recently, at 5:46am, I sent out a note to buy Silver Futures (/SI) at $19.51 and I just (7:46) put out another note to close it out at $19.70.  Why take a 19-cent gain off the table?  Because Silver Futures pay us $50 per penny, per contract so 19 cents is $950 per contract in two hours – that's good money!  

I Tweeted out that trade as well so make sure you follow me HERE if you want to know about more trades like that or JOIN OUR LIVE MEMBER CHAT ROOM and never miss another opportunity, like the one I also  posted this morning for Gasoline Futures (/RB)!

In yesterday's morning post, I called for shorting oil at the $104.75 line into inventories (10:30).  Of course, I made that call at 8:11 am, so forgive me for missing by a dime but we hit our shorting target (with a spike almost to $105) and then got
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Bernie Sanders, American Hero – Speaks out on Income Inequality

Thank God for people like Sanders – there's so few of them left:

“Will you sweep away the righteous with the wicked?  What if there are ten righteous people in the city? Will you really sweep it away and not spare the place for the sake of the ten righteous people in it?" – Genesis 18:22

 





Which Way Wednesday – Beige Books and Strong Bounces

SPY 5 MINUTEWow, what a fun day yesterday was!  

As you can see from Dave Fry's SPY chart, we went up in the Futures 30 S&P points and then we fell from the open 30 S&P points and then we recovered into the close 30 S&P points.  This is what we call a "Bugs Bunny Market," where Bugs throws a switch and people stamped in and out of the theater (5:00 on this video) -  and it's not usually a good thing.  

In fact, that's the action we saw back on 2/28, when I was warning people to get to cash and, in fact, I tweeted out a similar comment (with the same video link) and our trade idea for playing the next 45 days was:

TZA/Craig – Well, the April $14/17 is still doable at $1.30 and you can sell the $15 puts for .88 for net .42 now

RUT WEEKLYEven with the Russell's bounce off our 1,100 goal yesterday, TZA is still at $17.65 and the April spread, which expires tomorrow, is net $1.90 – up a very nice 350% in 45 days (you can follow me on Twitter here, but I rarely tweet our Member Trade Ideas – for those, you have to sign up HERE).  

We actually flipped long on the Russell during our Live Trading Webcast at 1pm yesterday, catching it pretty much on the button and I showed people, LIVE, how to make hundreds of dollars in just 15 minutes trading the Futures (replay available here). 

In yesterday's post, I reminded you we were shorting oil at $104 and we caught a $500 per contract move back to $103.50 but then (also live in the Webcast), we decided to wait for $105ish to re-short today (/CL Futures).  This morning, I posted early (6:22) to our Members that we had our shorting opportunity at $104.95 and already (8:06) we're back to $104.65 and that's good for $300 per contract after a hard morning's work – plenty of money for breakfast!  

We're still expecting a much bigger drop, probably not until after…
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Testy Tuesday – Tax Day Edition

Time to pay your taxes.

But, fortunately, it's still not time to pay the piper for all that money we're borrowing to goose the economy.  Well, goose may be too strong a term as 5 years and $5 Trillion Dollars into this mess, we're really only flatlined the GDP to where it was back in 2007.  

Did you get your $5,000,000,000,000 worth?  We know the top 0.01% sure did.  We've made the World's Billionaires alone $1.4Tn richer than they were in 2009 – and it only cost 140M working Americans $37,714 each!  That's how much $5Tn in additional debt has cost us – on top of the $2.5Tn we piled on fighting Iraq or Afghanistan for whatever reason it was we had to invade those guys. 

Billionaires

Don't worry, it's all fair, each one of those Billionaires also owes the same $37,714 as you do – they feel your pain!  Multiply that by 3.5 and that's your share of the National Debt, which is still growing by $500Bn a year, although that's 1/2 of how fast it was growing under Bush II.  And, of course, we're not even counting the Fed's $4Tn of additional debt – because we still get to pretend that will all work itself out in the end.  

Just like CHINA!!!  China's Central Bank has been trying to drain a little liquidity out of the system and it looks like that's already dropped GDP growth for the quarter down to 1.5%, nowhere near the 7.5% annual levels the Government was hoping for. That led Chinese stocks to fall about 1.5% this morning, led down by Financial and Commodity stocks.  That's the reaction to M2 (money supply) GROWING by 12.1% instead of the 13.3% it was growing a month earlier and despite $169Bn in loan growth.

FXI WEEKLY

“Investors are a bit worried because M2 is quite low,” Zhang Haidong, an analyst at Tebon Securities Co., said by phone in Shanghai. “New loans may be better than expected by a little, but it’s still not considered good data;


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Monday Market Movement – Down But Not Out

After a very ugly week, what's in store next?

This is one very ugly chart with an almost 10% drop on the Nasdaq and the Russell but that's GOOD news as it's about where we expect the Central Banksters to step in and do something, before things turn more ugly.  

That's why we weren't pressing our bearish bets last week and we took our very aggressive TZA and XRT bets off the table in our Short-Term Portfolio and our $25,000 Portfolio because, with the indexes down this far, we expect at least a weak bounce to start the week – the question is – what happens after that?  

Very simply, per our 5% Rule™, when the market drops 5%, we expect a 1% retrace and, in the case of the Nasdaq and the Russell, we expect a 2% retrace for a "weak bounce."  Also, as you can see on our Big Chart, we have some serious support on the Dow at our "Must Hold" lijne at 16,000.  There's pretty much no way it can fail that without a bounce.  

INDU WEEKLYThe Dow fell from 16,600 to 16,000 and that's only 3.6% but it's a strong support line but, as noted by Dave Fry in his Dow Chart, the real support comes at the 200 dma, at 15,750, and that's 5.1% today but that 200 dma will rise while it waits for the Dow so we can still expect a test at 15,800, which should be 5% by that time, assuming our weak bounce fails this week. 

On our other indexes, we'll be looking for:

  • Dow 16,600 to 16,000 is 600 points (3.6%) and we're looking for a 120-point weak bounce to 16,120 and a 240-point strong bounce to 16,240 before we believe any sort of "rally."  
  • S&P 1,900 to 1,815 is 85 points down (4.5%) so 17 points to 1,832 is weak and 17 more to 1,849 is strong but let's call it 1,850 before we're impressed.  
  • Nasdaq failed 4,375 and down to 4,000 (8.5%), also a strong technical support line that held up in late Jan/early Feb as well.  Keep in mind, when an index is going to fall 10%,


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Friday Failure – JP Morgan Misses Big!

Wheeeeee – down we go again!  

I hate to say I told you so but — no, actually I'm loving this one…  In fact, JPM specifically was our earnings short of the week – from our Live Chat Room on Monday morning, I said to our Members:

Earnings/QC – I think I like a bearish play on JPM best.   STZ also tempting for a short but, with JPM, we already liked them short on the Dow list.  With JPM at $59.60, I like selling the May $57.50 calls for $2.90 and buying the Jan $57.50/62.50 bull call spread at $2.40 to cover for a net .50 credit.  If all goes well, JPM goes down and the short May calls expire worthless and whatever is left on the spread is bonus money (plus the credit). 

This isn't that complicated folks, we just read the news and make a play.  The rest is just picking the right option strategy and allocating appropriate amounts of cash – this is what we teach people how to do every day at PSW (you can join us HERE).  That trade will be up more than 100% for the week this morning as JPM plunges to about $55.  Yet another example of all the fun things we can do with our CASH!!!

And you KNOW we shorted Oil Futures (/CL) at $103.50 – I told you that in yesterday morning's post.  We already hit $103 overnight (up $500 per contract) and we re-loaded this morning at $103.40 and now we're heading back to $103 yet again.  Hopefully this is the big one and we get a ride back to $102 – which would be up $1,500 per contract.

SPY 5 MINUTEI mentioned we were back to bearish in the morning post yesterday and, at 11:14, we added an aggressive SDS (ultra-short S&P) May $27/30 bull call spread at $1.15, buying 20 of those for $2,300, offset with the sale of a single ISRG 2016 $350 put at $31 ($3,100) for a net $800 credit.  In yesterday's sell-off alone, the bull call spread finished at $1.65 ($3,300)
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Fed-Fueled Thursday – Do We Have Enough Thrust?

Wow, what a recovery!  

I mean we expected a bounce yesterday on Monday, when we pointed out that there were 3 Fed Doves in a row speaking after the release of the minutes but – WOW! – that was pretty extreme.  Still, it only got us right to the 1,160 weak bounce we were looking for on Monday.  That's right, 1,160 on the dot was predicted Monday Morning, before the market opened, as the bounce line for the Russell.  

As I often remind our Members, I can only tell you what's going to happen and suggest ways to profit from it – what you do with that information is entirely up to you!    

What we did with that information on Monday, at 3pm in our Live Member Chat Room, was the following:

That's why I still like buying the f'ing dips on the Futures – worth losing a few while hoping to catch a nice bounce.  Now our lines are 16,200 (/YM), 1,835 (/ES), 3,500 (/NQ) and 1,130 (/TF) – any of which can be played bullish if 2 are over the lines.  

Needless to say, those lines worked out very well as we're now at 16,330, 1,861, 3,583 and 1,152 and Tuesday Morning's Alert to Members gave us an even better re-entries on the Dow (16,100) and a 230-point bump in the Dow is good for $1,150 per contract!  

This is why we LIKE having CASH!!! on the sidelines:  We catch a nice down move, cash back out – catch a nice up move, cash back out, etc. and, every night, we go to sleep not at all worried about what's happening.  It's not only relaxing, and profitable – it's FUN!

I put out a News Alert this morning (and you can now read those if you follow our Facebook Page, which is also where Members should go if the site ever crashes, so make sure you "Like" it) where we called for a "conviction short" on oil at $103.50…
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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!

 
 

Zero Hedge

Frontrunning: October 31

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

  • Futures rally after BOJ ramps up stimulus (Reuters), Japan's central bank shocks markets with more easing as inflation slows (Reuters)
  • Kuroda Jolts Markets With Assault on Deflation Mindset (BBG)
  • Japan Mega-Pension Shifts to Stocks (WSJ)
  • Russia Raises Interest Rates (...


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Phil's Favorites

Looking for a Good Education at a Low Price, Perhaps Free? Head to Europe

Courtesy of Mish.

On June 7, 2014 I wrote Looking to Drastically Reduce College Costs? Study Abroad!

Yesterday, a writer for the Washington Post expressed the same opinion.

Please consider 7 countries where Americans can study at universities, in English, for free (or almost free). Since 1985, U.S. college costs have surged by about 500 percent, and tuition fees keep rising. In Germany, they've done the opposite.

The country's universities have been tuition-free since the beginning of October, when Lower Saxony became the last ...



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Chart School

Moving Averages: Month-End Preview

Courtesy of Doug Short.

Here is a preview of the monthly moving averages I track after the close of the last business day of the month. All three S&P 500 strategies are now signaling "invested" -- unchanged from last month. Two of the five of the Ivy Portfolio ETFs, the PowerShares DB Commodity Index Tracking (DBC and the Vanguard FTSE All-World ex-US ETF (VEU), are signal cash "cash" -- also unchanged from last month.

If a position is less than 2% from a signal, it is highlighted in yellow.


Note: My inclusion of the S&P 500 index updates is intended to illustrate a popular moving moving-average timing strategy. The index signals also give a general sense of how US equities are behaving. Howe...



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All About Trends

Mid-Day Update

Reminder: David 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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Insider Scoop

Jennings Capital Downgrades Ballard Power Systems

Courtesy of Benzinga.

Related BLDP Lake View: Ballard Power Systems 'Making Progress' Morning Market Movers

Jennings Capital downgraded Ballard Power Systems Inc. (NASDAQ: BLDP) in a report issued Thursday from Buy to Hold and lowered its price target from $5 to $3.

Analyst Dev Bhangui noted that the company "reported Q3/14 results that were below our and consensus estimates. EPS were ($0.02) versus JCI and consensus of ($0.01). Revenue and gross margin m...



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Sabrient

Sector Detector: Bullish conviction returns, but market likely to consolidate its V-bottom

Courtesy of Sabrient Systems and Gradient Analytics

Bulls showed renewed backbone last week and drew a line in the sand for the bears, buying with gusto into weakness as I suggested they would. After all, this was the buying opportunity they had been waiting for. As if on cue, the start of the World Series launched the rapid market reversal and recovery. However, there is little chance that the rally will go straight up. Volatility is back, and I would look for prices to consolidate at this level before making an attempt to go higher. I still question whether the S&P 500 will ultimately achieve a new high before year end.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then o...



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OpTrader

Swing trading portfolio - week of October 27th, 2014

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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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the latest Stock World Weekly. Enjoy!

(As usual, use your PSW user name and password to sign in. You may also take a free trial.) 

 

#455292918 / gettyimages.com

 

...

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Market Shadows

Bill Ackman's Big Pharma Trade Is Making Wall Street A Super Awkward Place

 

#452525522 / gettyimages.com

Intro by Ilene

If you're following Valeant's proposed takeover (or merger) of Allergan and the lawsuit by Allergan against Valeant and notorious hedge fund manager William Ackman, for insider trading this is a must-read article. 

Linette Lopez describes the roles played by key Wall Street hedge fund owners--Jim Chanos, John Paulson, and Mason Morfit, a major shareholder in Valeant. Linette goes through the con...



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Option Review

LUV Options Active Ahead Of Earnings

There is lots of action in Southwest Airlines Co. November expiry call options today ahead of the air carrier’s third-quarter earnings report prior to the opening bell on Thursday. Among the large block trades initiated throughout the trading session, there appears to be at least one options market participant establishing a call spread in far out of the money options. It looks like the trader purchased a 4,000-lot Nov 37/39 call spread at a net premium of $0.40 apiece. The trade makes money if shares in Southwest rally 9.0% over the current price of $34.32 to exceed the effective breakeven point at $37.40, with maximum potential profits of $1.60 per contract available in the event that shares jump more than 13% to $39.00 by expiration. In September, the stock tou...



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Digital Currencies

Goodbye War On Drugs, Hello Libertarian Utopia. Dominic Frisby's Bitcoin: The Future of Money?

Courtesy of John Rubino.

Now that bitcoin has subsided from speculative bubble to functioning currency (see the price chart below), it’s safe for non-speculators to explore the whole “cryptocurrency” thing. So…is bitcoin or one of its growing list of competitors a useful addition to the average person’s array of bank accounts and credit cards — or is it a replacement for most of those things? And how does one make this transition?

With his usual excellent timing, London-based financial writer/actor/stand-up comic Dominic Frisby has just released Bitcoin: The Future of Money? in which he explains all this in terms most readers will have no tr...



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Pharmboy

Biotechs & Bubbles

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

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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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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