Phil's Newsletter

Will We Hold It Wednesday – S&P 2,000 Edition (again)

SPY 5 MINUTEWell, we've seen this movie before.  

I'd say "I told you so" but that's getting boring and, after all,t he headline for yesterday's post was "China’s 20.4% Import Collapse Has Us Testing S&P 2,000 Again" so it's not like it was a subtle prediction.  Last Friday, despite the rally it was "Earnings Iceberg Dead Ahead" and, like the guy who said the same thing on the Titanic – nobody likes to listen to the guy with bad news, do you?  

Ever Cramer has finally come out of his buying stupor and is telling his sheeple to cash out and get to the sidelines.  Of course, if Cramer is on my side of the table, I have to question my premise as I called this top 2 months and 5% ago while he was still foaming at the mouth and telling people to BUYBUYBUY at 2,100+.  I'm the guy that Cramer warned you was "spooking people out of stocks too soon" but it's a Hell of a lot easier get to cash while the market is going up than after it's already pulled back and your portfolio has taken damage.

NYMO DAILYIt's also a lot easier to hedge when the market is high – as the hedges are a lot cheaper then.  Cramer's newfound selling premise is based on the McClellan Oscillator, which I had pointed out last week was way overbought and remains so BUT it's significantly improved from last week on a fairly minor overall pullback and that's actually a bullish signal – if the indexes confirm by holding our bounce lines.  

Back on 8/26, we predicted the indexes would bounce from their 2015 lows (8/24 was the big crash) to the following levels, based on our fabulous 5% Rule™:

  • Dow 16,200 (weak) and 16,650 (strong) 
  • S&P 1,900

continue reading

Tuesday – China’s 20.4% Import Collapse Has Us Testing S&P 2,000 Again

Chinese imports fell 20.4% in September.  

That's in Dollar terms, you'll hear it's "just" 17.7% in declining Yuan but that's the same BS people fall for when looking at Japan numbers, where the 16% decline in the Yen makes all their numbers seem not quite as awful as they actually are.  Nonetheless, next week China will release their Q3 GDP numbers which will tell you their economy is magically growing 7% – despite the fact that they are buying 20% less stuff (and exports were down 3.7% too!).  In fact, had it not been for surging oil imports as China topped off their reserves – the numbers would have been a lot worse!  

Other than the occasional bursts of IPhone shipments, it's been all downhill for China this decade.  This is all happening DESPITE the fact that China’s policymakers have increased infrastructure investment and loosened monetary settings in a bid to cushion the slowdown. The latest steps include new approvals to build rail networks, the expansion of a plan allowing lenders to borrow from the PBOC using loans as collateral, a tax cut for vehicle purchases and a reduction in the minimum down payment for first-time home buyers. 

"We anticipate further headwinds in the coming months," saidTao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. "Our model suggests that global industrial production will lose further momentum. Not only China but emerging market countries are also struggling with domestic demand."

The IMF said the “cross-border repercussions” of slowing Chinese growth “appear greater than previously envisaged.”  Gee – ya think?   As we've been warning you (have I mentioned how much I like CASH!!! lately?) China's economic slowdown is quickly spreading to all of the Emerging Markets and even Europe is not immune.  This morning, Germany's ZEW Sentiment Index fell 84.3%, from 12.1 to 1.9 – miles below the 6 that was forecast by leading economorons.    

"The emissions scandal at Volkswagen and sluggish growth in emerging markets are dampening the economic outlook for Germany," ZEW President Clemens Fuest said in a statement. 

Gee, ya think?  Why is everything always a surprise to these people?  It's…
continue reading

Monday Market Preview – Earnings Season Begins

10-9-2015 6-32-49 PM EPSWell, at least the expectations are low now.

As you can see from the chart on the right, earnings have been revised down 30% in the past week (for companies that reported) and that's the worst pace since 2009 – so we've got that going for us.  Meanwhile, the Fed is sending a lot of mixed messages – telling us the economy is strong but also telling us rates will have to stay low a lot longer because the economy isn't strong enough for higher rates yet.  

Earnings aren't important when rates are this low.  Look at Dell's purchase of EMC for $67Bn this morning.  Dell went private, so they don't have to answer to anyone and now they are taking EMC private – an action that will drop $67Bn cash into the markets and take EMC out of the S&P and diminish the overall share count for the market.  This is all very nice of them since EMC was priced at just $40Bn two weeks ago.

ZIRP lets companies borrow so cheaply they can do deals like this as EMC's $2.7Bn in profits fund a low-rate deal and Dell is likely to pump up the bottom line a bit and then flip EMC back out, repackaged, to the public market and suck all that money back out down the road but, for now, it's a huge amount of bonus cash coming in.  

Just like in 2007, corporate buybacks are driving a massive equity rally and, as long as we keep getting deals like Dell/EMC to fuel us, this rally can keep going indefinitely.  The Fed just keeps printing money and, before the ink even dries on the newly printed bills, they are traded for assets which keeps up the appearance of demand.  This is why the Fed can't stop easing.  There is no real demand – just this sort of financial engineering on a massive scale.  

Speaking of financial engineering – you won't hear about this in the MSM because it doesn't fit the "Everything is Awesome" narrative but the Fed just revised the US's Total Debt up by $2.7Tn.  Total Debt is the sum of US credit exposure
continue reading

Philstockworld Top Trade Review – October

How interesting the markets have been.  

In our August Top Trade Review, I mentioned we were starting a new product, which began as the 5% Portfolio and was renamed the Options Opportunity Portfolio, which has been a huge success, now up 16.7% at the close if the second month:

These are, for the most part, short-term trades but we've been layering in some longer-term trade ideas – using our profits to invest in trades that will generate steady monthly gains over time, rather than only focusing on "quickies".  

Our Top Trade Ideas, generally, tend to be longer-term trades and we don't have a portfolio that tracks them specifically.  They are generally selected trades from the ones that we are adding to PSW's Short-Term Portfolio or Long-Term Portfolio and tend to be of the "set and forget" variety, while our OOP trades require a bit more active management.  

While 30 of our first 45 (66%) Top Trade ideas were winners, 4 of our 15 losers were Lumber Liquidators (LL) trade ideas – all of which are now coming back as LL pops back to $20!  Hopefully it can break over $20 and we can put all that silliness behind us.  

Getting two out of three trades right is plenty to move the investing ball towards the goal line.  Combine that with sensible portfolio management techniques (diversification, managing losses, hedging) and you'll beat the S&P by a mile with no sweat.  Generally, with our Top Trades, we're simply picking stocks we feel are underpriced and we're using our various options techniques to give ourselves even better discounts and hedged entries but these are patience plays – that do take time to get going, though we did call for a cash-out of our winners in July, so August was kind of a fresh start.

Without further ado, here's the next month of trades for review – some are still good for new entries:

On Aug 4th we saw a news article that Windstream (WIN) won a contract for $450M to build out wireless services for the VA.  As WIN was a company we had played in the past, this…
continue reading

Factual Friday – Earnings Iceberg Dead Ahead!

Wow, what a rally!

Yeah, yeah – go markets, BUYBUYBUY!!!  OK, now that we have that out of our system, how about we take a deep breath and try to get real?  This week has been the best week for the markets since late February and that's nice BUT, in early March, we gave back 50% of the gains.  

While we are bound to respect the technicals over our strong bounce lines – we are very happy to remain mainly in cash ahead of the earnings reports.  

As you can see from this Zacks chart - and as I noted on Benzinga Radio the other day, Q3 earnings are going to suck.  Alcoa (AA) kicked things off with a bomb last night and the economic hits are just going to keep on coming as companies around the World report on the damage that's been caused by our anemic Global economy.  

You don't have to take my word for it – just ask Nobel prize-winning economist, Joe Stiglitz:

As I said on Benzinga the other morning, how can earnings be good?  Oil will be a disaster, of course (7% of the S&P), Banking is having trouble with low rates squeezing lending margins and M&A slowing down considerably (16% of the S&P) and Retail (16%) is sputtering, Manufacturing orders are the worst we've seen since the last crash and Materials (2.5%) were in a death spiral until this week (and the banks lend to these guys too).  

Expectations/Market Prices simply haven't come down enough to reflect that – certainly not after this week's rally.   Is this market really priced for two big, negative quarters?

The Energy drag notwithstanding, there is not much growth elsewhere either, with earnings growth for half of the 16 Zacks sectors expected to be in the negative for the quarter. The strong U.S. dollar and China-centric global growth questions are some of the key issues that will figure prominently in the earnings reports and management’s outlook for the last quarter of the year.

continue reading

Faltering Thursday – Here Come Those Tears Again

SPY 5 MINUTEAnd the struggle continues.  

As you can see from Dave Fry's SPY chart, this is the worst kind of "rally" where we get big volume sell-offs followed by low-volume, bot-driven pump jobs aimed to sucker the retailers into buying the dips so the guys driving the tradebots can dump more shares on them.  Wash, rinse and repeat until the big boys are all cashed out (we already are!) and then they pull the rug out and crash the market.

The crashing part will be easy – all they have to do is not prop it up but, for good measure, "THEY" can always send their minions out to TV stations with a few well-placed downgrades to really send things into a tailspin.  Suddenly, Russia bombing Turkey Syria, China's collapsing economy, Europe's slow economy, the refugee crisis, Fed raising rates, terrible US Jobs and Manufacturing numbers, Brazil or Venezuela's collapsing economies, Greece (again) or even our Debt Ceiling (again) will suddenly matter and the markets will quickly drop 10%.  

I was on Benzinga's Pre-Market Show yesterday morning talking about my value reasons for being short up here (S&P 2,000):

It's not that we're all bearish – we have a lot of material stocks and our portfolios are at record highs this week so THANK YOU manipulators – it's just that we think the stocks we already cashed out of have further to fall before they are "correctly priced" – like the many material stocks we stuck with when we cashed out the rest.  Having a materials-heavy portfolio this past week turned out to be the perfect way to play this bounce.  

In fact, today is the end of month 2 for our Option Opportunities Portfolio over at Seeking Alpha, where our goal is to make $5,000 a month (5%) in a $100,000 portfolio and I'm very happy to say that our closed positions are, in fact, up $14,905 (14.9%) after 60 days:

As you can see, we only had to close 12 positions, averaging better than $1,000 per position with an average hold time of just over 2 weeks but, as we do that, we've been putting…
continue reading

Will We Hold it Wednesday – S&P 2,000 Edition

"Look for the big W."

It's the plot of "A Mad, Mad, World" and also the chart pattern we're getting as the S&P 500 makes yet another MIRACULOUS recovery off our Must Hold Line at 1,850.  The 2,000 line is where the rubber hits the road and it's 8% over 1,850 and halfway back to our highs but, as you can see from our chart – there are A LOT of resistance lines bunched up in that area.

Our expected strong bounce line for the S&P was 1,950 (see yesterday's post), so that's no surprise and the Dollar is down 1% so add 19 more points and that's 1,970 without even overshooting the mark so no shocker at all to see us testing 2,000 but going over 2,000 is going to be another matter entirely.  

For one thing, for the S&P to get over 2,000, the DAX has to get over 10,000 and, as you can see, we're right on that line now with a 1% gain on the day – capping off a 6.4% run from last week's low at 9,400.  So, if the DAX is having trouble at 6.4%, why do we think the S&P will breeze over significant resistance at 8%?  

If you are going to be a TA person – those are the kind of questions you should be asking yourself.  As a Fundamentalist, however, I would ask you how any of this is happening when we just got TERRIBLE Industrial Output reports from Germany (-1.2%) and Spain (-1.4%).  It is especially troubling for Germany, where leading Economorons predicted a gain of 0.2% because – well because they are clueless practitioners of a voodoo profession.

When are Economists (and Investors) going to wake up to the concept that the Global Economy is WEAK and still essentially in a recession – the one that never ended but has been papered over by TRILLIONS of Dollars in stimulus that has faked growth for 6 years.  Like the proverbial dead parrot, this economy wouldn't go "voom" if you put $4Tn into it – and the Fed has proven that point – as has the BOJ, the PBOC, the ECB, RBI, SNB, ETC…  This is an EX-ECONOMY!!

continue reading

Technical Tuesday – Failure at the 50 DMA

Here we are again.  

It was only Friday afternoon that we were predicting we'd bounce to our strong bounce lines and then test the 2,000 line on the S&P, where we'd run into the declining 50-day moving average and likely fail.  Only we thought that would happen at the end of this week – not Tuesday morning!  

Nonetheless, it was fortunate that we expected this as we went into the weekend bullish in all 4 of our Member Portfolios (see weekend reviews) and we had a spectacular day yesterday – especially in our Options Opportunity Portfolio, which blasted up 7.1% in a single day, gaining over $7,000 as the markets spiked higher and rewarded us for our aggressive stance.  That led us to consider if, in fact, we are now too bullish – as we're already at the 2,000 level we were playing for. 

We cashed out last week's Micron trade with a 200% gain on our bull call spread and we used that money to buy an additional SQQQ hedge (see comments) to lock in some of our quick gains.  Today we'll be watching the S&P very closely to see if it's either breaking back over the 2,000 line (50 dma) or failing the 1,950 (strong bounce) line – which would be a BAD sign.   

As you can see from the Futures chart, the S&P has been rising on less than 1/3 the volume it fell on, which means it's most likely just a pump job driven by TradeBots to sucker the retailers back in so the big boys can start dumping again.  Bill Gross has now joined me in calling for CASH!!! and predicts the markets will drop another 10% from here although, at this point, that only brings them back to about last week's lows.

Gross is concerned about earnings and so is Morgan Stanley, who are seeing a 5.1% decline in Q3 S&P earnings – much, much worse than the 1% decline expected by leading Economorons.  Of course the Energy Sector is a disasters but Utilities, Consumer Staples, Industrials and Materials have gotten much worse while expectations for Financials have been trimmed by 50% and even Health Care is getting a
continue reading

Option Opportunities Portfolio Gains 7.1% in a Day – Too Much?

When do you call it "too much profits?"

We just did a review this weekend and decided we liked our 12 bullish positions and 1 bearish hedge enough to stick with them without making any changes and today you can see why.  Our Options Opportunities Portfolio jumped from $107,152 to $114,302 – gaining $7,150 (7.1%) in a single session.  These are good companies, folks – that's why we bought them!  

Unfortunately, as much as we like them, we have to be realistic about whether or not they can sustain moves like this.  After all, the goal of the OOP is simply to gain 5% each month using as little of our $100,000 base as possible – gaining 7% in a day is a bit over the top!  Let's take a quick look at how we got from there to here and see if we need to make any other changes.   Also, we had a few new subscribers today – so I want to make sure they know which are our favorite positions and why. 

On Friday, we closed looking like this:

Today, we cashed in the main part of our MU spread with a nice profit and we invested that money to pay for a more aggressive hedge with our SQQQ position.  It's a good practice to always use some of the money you make on the way up to hedge for the way down – just in case:  

See how easy that was?  Still $7,150 in a day is a bit ridiculous and indicates we're a bit too aggressively bullish so we need to look at our positions and see if there's some we want to take off the table or protect.  Cash-wise, we have the same $97,000(ish) we started with but now it's only 85% of the portfolio vs 90% of our portfolio on Friday.  Not a big difference – but we don't really trust the markets enough to have too many open positions.  

I did extensive commentary in the weekend post, this is just a quick review after today's big move:

  • BID – We love this one and they barely

continue reading

Monday Market Mayhem – Back to our Bounce Lines

SPX WEEKLYIt's all very exciting isn't it? 

Well, not when you look at a weekly chart, like this one from Dave Fry but, when you look at and hourly chart, like the ones most people seem fixated on – like this one:

Well, you'd think this was actually the greatest rally ever and everything is all fixed – just like our very short-sighted, know-nothing, cheerleading MSM is telling you. 

Sure we're still 8.25% below that 2,125 line but we're up 4% from 1,875 so let's focus on the good stuff – even though we actually fell the predicted 10% with a 20% (of the drop) overshoot and now we're bouncing 20% (of the drop) off the 10% line back to -8% line, which the 5% Rule™ tells us is a WEAK bounce.  The strong bounce line is still back at 2,000 and that's when we'll turn more bullish.  Until then, we're just waiting for this bounce to run out of gas so we can take our next poke short.  

SPY  5  MINUTEWhile we did start the day bearish on Friday, we knew the Fed speakers would turn things around and I called the flip at 10:17 in our live Member Chat Room, saying:

Silver into a new leg up now, Gold flying too.  Dollar failing $95.50.  /NKD down 500 points for another $2,500 winner!

NONETHELESS – We now have no more data and 3 more Fed speakers coming so I think we may get a bounce here (16,000, 1,890, 4,125 and 1,080 would be the bullish lines to play over – 2 of 4 need to be over and then you can play the 3rd and make sure the 4th follows and make sure NONE go back below).

Those futures plays, of course, made disgusting amounts of money as we turned around and rallied (S&P Futures pay $50 per point, per contract - for example) and we nailed…
continue reading


Zero Hedge

License To Steal: Italy's Highest Court Rules "Theft Not A Crime If Hungry"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Mike "Mish" Shedlock

License To Steal: Italy’s Highest Court Rules “Theft Not A Crime If Hungry”

In a ruling sure to heighten migration tensions in the EU, Italy’s highest court rules “Theft Not a Crime if Hungry...

more from Tyler

Phil's Favorites

China Warns Economists, Analysts, Reporters About "Overly bearish" Remarks

Courtesy of Mish.

I remain in “awe” of China-loving proponents who believe the Yuan will soon supplant the US dollar as the world’s reserve currency on the way to becoming the world’s top economic power.

By soon I mean a “decade” or less. It’s not going to happen.

Centrally planned bogus economies, with tiny illiquid bond markets, huge capital controls, pegged currencies, and no freedom of speech are no way suitable for such lofty expectations.

One can make such comments here, in China, you are in trouble.

Please consider China Presses Economists to Brighten Their Outlooks.


more from Ilene

Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Seven big banks settle U.S. rate-rigging lawsuit for $324 million (Reuters)

Seven of the world's biggest banks have agreed to pay $324 million to settle a private U.S. lawsuit accusing them of rigging an interest rate benchmark used in the $553 trillion derivatives market.

Here's What Usually Happens to Stocks in Years Like 2016 (Bloomberg)

Despite the huge comeback in the S&P 500, investors remain skeptical of...

more from Paul


2016 Sohn Conference: Schreiber, Robbins, Einhorn, Druckenmiller, And More [LIVE]

By Jacob Wolinsky. Originally published at ValueWalk.

The 2016 Sohn Conference starts on Wednesday (May 4th) at David Geffen Hall, Lincoln Center 10 Lincoln Center Plaza New York City. As is our custom at ValueWalk we will be providing in-depth coverage of the most anticipated event of the year. The line up this year once again does not disappoint.

Note – we will post all links to our coverage on this page so just bookmark it or sign up for our free newsletter– also we will post the schedule once it is up

Sohn Investment Conference 12:00PM – 5:30PM

Here are the speakers

  • Larry Robbins, Glenview capital
  • David Einhorn, Greenlight Capital
  • Zach Schreiber, Poinstate Capital
  • ...

more from ValueWalk

Chart School

Market Recap May 3, 2016

Courtesy of Blain.

Indexes gapped down at the open on weaker than expected Chinese manufacturing data, and buyers never really showed up Tuesday.  The S&P 500 finished off 0.87% while the NASDAQ dropped 1.13%. In China, a private gauge of nationwide factory activity in China fell to 49.4 in April, indicating a faster pace of contraction and missing analyst forecasts.

“I don’t see one lever pushing everything. It’s a combination of again more of that risk-off, valuations a little extended, earnings did come in a little better (but still declining), concerns coming out of weaker PMI numbers pointing to lackluster growth,” said Tim Dreiling, senior portfolio manager with the Private Clie...

more from Chart School

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...

more from David

Kimble Charting Solutions

DAX Index (Germany) - Leading indicator pulling S&P down with it?

Courtesy of Chris Kimble.

Over the past 12-15 months, the majority of global stock markets have been in a down trend, creating a series of lower highs and lower lows. The German Stock market peaked around 6-weeks ahead of the S&P 500 last year and could be considered a global trend leader, creating a domino effect.

Below updates the pattern in the DAX index-


The DAX index remains inside of long-term rising channel (A), no doubt ...

more from Kimble C.S.

Digital Currencies

Is Craig Wright The Creator Of Bitcoin? Frisby and Matonis On 'Satoshi Nakamoto'

Courtesy of ZeroHedge. View original post here.

Is Craig Wright The Creator Of Bitcoin? Frisby and Matonis On ‘Satoshi Nakamoto’

By Mark O' 

Craig Wright, an Australian computer scientist, self-declared cyber security expert and entrepreneur, has claimed to be the creator of Bitcoin, the elusive &l...

more from Bitcoin


Swing trading portfolio - week of May 2nd, 2016

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 ...

more from OpTrader


PRGO, VRX and an Overpriced Papa

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

By Ilene 

Remember this? It was Monday. PRGO is down from around $130 to under $100 since I started following it LAST WEEK. That's down almost 25% in a week, and almost 50% in the last year. So I wrote, 

"Perrigo CEO Joseph Papa leaves Perrigo (PRGO) to lead Valeant (VRX) while PRGO issues a warning about missing earnings expectations. Not surprisingly, PRGO stock plummeted today. 

Robert Ingram, Chairman of the [Valeant] Board, stated, "The Board has conducted a thorough search process and believes that Joe is the ideal leader for Valeant at this time. He has a strong shareholder orientation,...

more from Biotech

Mapping The Market

About that debate last night

Although we try to stay focused on finding and managing promising trade ideas, the comments in the comment section sometimes take a political turn (for access, try PSW — click here!). So today, Jean Luc writes,

The GOP debate last night was just unreal – are these people running to be president of the US or to lead a college fraternity! Comparing tool size? The only guy that looks semi-sane is Kasich. The other guys are just like 3 jackals right now. 

And something else – if Trump is the candidate, that little Romney speech yesterday is probably already being made into a commercial. And all these little snippets from the debate will also make some nice ads! If you are a conservative, you have to be scared now. 

Phil writes back,

I was expecting them to start throwing poop at each other &n...

more from M.T.M.


PSW is more than just stock talk!


We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more! features the most important and most interesting news items from around the web, all day, every day!

News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...

more from Promotions

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 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.

Thank you for you time!

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...

Learn more About Phil >>

As Seen On:

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 >>