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Phil's Newsletter

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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Wednesday Weakness – Will The Fed Turn Us Back Up?

Wheeee – what a ride!  

As nasty as our Big Chart looks at the moment, we only have two Vomiting Cobra Patterns (Nasdaq and Russell) while the other three indexes are still forming Spitting Cobras, which are only LIKELY to head lower.  

Today we run right into an inflection point as the Federal Reserve releases the Minutes of their last meeting at 2pm, followed by Evans (dove) speaking at 3:30 and Tarullu (dove) speaking at 7pm, in case the Asian markets don't get the message about how doveish we intend to be the first time.  

Forget the Ukraine, there's an all-out Global currency war being waged even as we speak and yesterday the Dollar was the clear winner by losing 1% of its value in a single day.  With over 250 days left until the end of the year, that extrapolates out to -150% by Christmas, which means you'd better start shopping now, before your next IPhone costs $1,000 (if you can even afford the gas to get to the store, that is).  

While a weak currency may not be good for those of you with JOBS, who get paid in Dollars or those of you with small businesses, who buy more and more expensive raw materials and then have to accept Dollars from your customers – for our Corporate Citizens, it could not be better – as they sell 50% of their goods overseas so a weak Dollar is great for sales and it lowers the relative wages they pay US workers and, of course, it makes Dollar debt so much cheaper to pay back.  

That is how the Interests of our Corporate Citizens and the Government align.  Our Government also has a lot of debt to pay back, but they have to pay it back in Dollars and, the less the Dollar is worth, the cheaper it is for them to pay it back.  USUALLY, when your currency is weak, interest rates rise to compensate – so there's a check and balance to the system but the Fed has destroyed those checks and balances, allowing us to devalue our currency with NO CONSEQUENCES – EVER!!!

Well,…
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Technical Tuesday – Small Correction or BIG TROUBLE?

Wheeeeee – down we go!

We couldn't be happier, of course – as we were feeling a little silly having cashed out a month ago, with the market making new highs on us.  Still, we stuck to our Fundamental guns and now we are outperforming the market by a mile this year and, even better, we have some exciting opportunities to use our sideline cash to do a little shopping – but not yet.  

There's no hurry.  Those XRT May $84 puts I mentioned in yesterday's post that went from 0.85 last Thursday to $1.42 yesterday morning hit $2.35 into yesterday's close.  That's up another 65% in a day and that's money that's compounding for us on the way down, up 176% in 3 days now.  This is what we do with our sideline cash – so it's not like we sit around twiddling our thumbs…

I sent out an Alert to our Members yesterday to sell the T July $35 calls for $1.10 to cover a long position we have on T.  Pre-market they are down 1% and those short calls are up 10% on day one already – but there's 100 more days to go.  Again, this is what we can do with our sideline cash.  We also shorted JPM in an earnings spread – that trade is here from our Live Daily Chat Room.  

We had lots of fun in our Futures trading, flip-flopping our bets for the bounces and catching nice moves in both directions – but mostly down.  We even made some quick money with long plays on the Momo stocks – also playing for bounces.  Our last trade idea of the day was shorting /NKD as it failed the 14,800 mark into the close (coupled with a falling Dollar and rising Yen) and that index fell straight down to 14,450, good for $1,750 per contract.  We were already longer-term short position on the Nikkei through our EWJ puts in the Short-Term Portfolio, this was just a bonus bet.  We also added JNJ May $95 puts at .80, those could be fun if the weakness continues.  

RUT WEEKLYNow things are going to
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Monday Markets – Guiding in for a Crash Landing?

It's earnings season again!  

Guidance has gotten uglier, as evidenced by this FactSet chart.  These are those annoying Fundamentals I keep whining about while everyone else is trying to have a good time betting on the bull market lasting forever.  

Of course, we know how to make money off this news – just last Thursday I sent out an alert to our Members at 9:39 am, after we discussed "positive" retail sales data and I put it in context in Member Chat, saying:

Retail sales – That data is very misleading because they were slashing prices to clear inventory.  I wouldn't bet a penny based on Retail Sales numbers in Europe until we see the earnings reports.  I expect margins will be squeezed hard.  

Speaking of which, our buddies at XRT are back where we love to short them so let's add 5 May $84 puts at 0.85 in the $25KP and 10 in the STP. 

As you can see from the chart, we timed it just right and those puts are already $1.42 as of Friday's close, up 67% per contract in 48 hours.  That's $1,420 back off an $850 investment (10 contracts) in just two days.  We can make plays like this because we have cash on the sidelines, since we took our money and ran at the top of the market.  Perhaps I was too cautious – as we haven't had much of a pullback yet – but who cares when we can make quick profits like these? 

SPY 5 MINUTEAlso in Friday morning's post (Report Members get them delivered, in progress at 8:35 and final copies before the market opens each day), I called for shorting the S&P Futures (/ES) at 1,890 (and we just held a Live Trading Futures Workshop on Tuesday)
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Non-Farm Friday – Is America Working?

SPY 5 MINUTESorry, but this "rally" is just too much BS for me. 

As you can see from Dave Fry's SPY chart, we're running up on ZERO volume in the Futures and then we sell off all day on very low volume (because there are no buyers and the Funds are exiting slowly) and then we have dip at the finish as the ETFs that HAVE to buy at MOC (Market on Close)pricing get shares jammed down their throats by the pumpers.  

It's a complete and utter farce and completely ignored by the MSM, especially the Financial Media, who just play along as if none of this matters.  While you may consider the manipulation of currency and metals markets to be news (both are under international investigation at the moment) – it doesn't rate a mention in the Financial Media, who's advertising revenue comes mainly from the companies that are being investigated for fraud and manipulation.  

SPY 5 MINUTEApril Fools! The above is what I wrote along with the chart on March 7th in "Non-Farm Friday – America Still Not Working." That was 30 days ago, we've come a long way since then because, THIS TIME, we have SPY at 188.63 coming into Non-Farm Payrolls, so take THAT 188.10 – IN YOUR FACE!  

Despite the month-long flatline, the bullish trade idea we had back on 3/7 was a big winner.  Our trade idea in that mornings post (which you can get delivered to your mailbox, pre-market by subscribing here) was:


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Free Money Thursday – Chinese Stimulus To the Rescue!

MORE FREE MONEY!!!

China gave the markets a big boost this morning by announcing an immediate $25Bn program for railway construction and another $50Bn a year for "more stuff."  That sent the Nikkei flying to 15,150 but then Chinese Non-Manufacturing PMI fell to 54.5 for March and the Nikkei gave back 75 points while the Hang Seng closed just 0.2% over flat and the Shanghai fell 0.75%, back to 2,043, just 5% over the lows they've been testing all year at that critical 2,000 line.  

Now to some extent we could say "what's the difference where the money comes from, as long as they keep giving it to us?" and that would be the correct attitude, if we were 8 years-old and had no concept of consequences!  As adults, we should wonder – WTF are all these Governments so afraid of that they can't even allow a small correction before jumping back in with "emergency measures"?

China's House of CardsThe simple answer is that IT'S A GIGANTIC CON, like the time they built a fake town in Blazing Saddles - it looked good, as long as you didn't look behind the facades.  If you actually tried to touch it, it would fall over like a house of cards.  That's what happens when you prop up an economy with stimulus – you haven't built a foundation – it's all a facade, so the Central Banks that built it are terrified to see it tested….

The con depends very much on people BELIEVING that the house of cards is a real house.  Without a constant inflow of investment Dollars, the slightest breeze can knock the whole thing over and we'd be right back to the wreck we had before.  And, of course, it's not just China that's built a house of cards.  The US, Europe, Japan – pretty much all the Central Banksters are participating because, rather than let the banks fail in 2009, they pretended everything was OK and went about trying to back-fill the $15Tn Global hole in their balance sheets by printing money and, not so subtly, handing it out to them.  

That's over $5Tn in debt (now, this…
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Will We Hold It Wednesday – The Lies We Tell Ourselves

SPY 5 MINUTES&P 1,886 – a new record!  

Sure only 86M shares were traded on SPY (see Dave Fry's chart), which is about what's usually traded on a holiday but why should we let that bother us.  As Dave noted in his post last night:

 Predicting market movements is a waste of time even for the best strategists. This is a period when following technical systems pays off especially remaining disciplined and systematic. This includes having cash available to move as conditions change. It’s fun to predict the future marked by witty and amusing comments. That’s just entertainment.

Following trends is no different than following the money. Over the past 5 years this has led to following gifts of liquidity from the Fed and other central banks. A more dangerous method is to guess central banks next move. Janet Yellen has already laid her marker down the Fed will continue to be accommodative for a long period ahead. Bulls interpret this as bullish for equities and being nobody’s fool, they’re just going with the 5-year historical trend. The ECB is expected to provide more stimulus at its next meeting Thursday. The PBOC is expected to do so as well soon even as the finance minister has said they wouldn’t. Bulls obviously bulls don’t believe him for now.

With bulls believing the “all clear” has been sounded by Yellen, bulls can return to a “bad news is good” modus operandi enjoying or ignoring bad news.

SPX WEEKLYAs pointed out by Zero Hedge, "While QE may have tapered to a "measly" 55 billion per month, on just the first day of April risk assets experienced
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Triple Top Tuesday – 3rd Times a Charm?

Here we go again.  

This is our 3rd visit this year to 1,880 on the S&P and maybe this time will be different and, if so, we'll simply have to deploy some of our cash on some bullish plays.  Materials are still down, gold and silver are still low, Solars fell out of favor, Biotechs had a nice sell-off, China and Russia are low – plenty of things to buy if we're really breaking back up. 

In fact, with the Nasdaq below 4,200, down from 4,400, that's 5% off and TQQQ is the ultra-long 3x Nasdaq ETF and it's at $61.45, down from $70 last month and you can buy the April $65/68 bull call spread for just 0.55, selling the $51 puts for 0.45, risking just $10 of cash to make up to $300 per contract if TQQQ recovers in the next 2 weeks.  $51 happens to be the 200 dma on TQQQ, so it seems like reasonable support, especially if the Fed keeps pumping in cash at the extreme levels they hit at the end of this quarter (and the last):

3-31-2014 6-43-31 PM Reverse REPO

SPX WEEKLYWe were 3 full weeks into January before the market started collapsing so figure that's the ebb and flow of all this FREE MONEY that's being funnelled through the Banksters to keep up appearances.  We have a similar double top patten now and we'll see if this time is different and we break on through to new highs with this extra 25% injection of liquidity to top off the quarter.  

Of course, we're not really bullish until we see those highs broken so I'd rather sell an AAPL Jan $400 put for $5.90 ($590) and that's enough to buy 10 of the spreads for $450 and we make $3,000 if all goes well with a $140 credit still in our pockets and our worst-case scenario is owning AAPL for net $401.40 (25% off the current price).  That's a fun way to hedge to the upside, which is why we're in no hurry to pull our cash off the sidelines – we have lots of cool ways to make money. 

In fact, …
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Meaningless Monday Window Dressing – Waiting for Things to Get Real

 photo football5.gifHow can you tell when the markets are FAKED?

I've been telling you for years about the various ways the market is rigged and now Michael Lewis has written a whole book about it called Flash Boys, which was featured last night on 60 Minutes.  If you don't have time to read the book – at least PLEASE watch the 60 Minutes video.  

While I find it morally repugnant and I spend countless hours speaking out against it and doing my best to bring these systemic abuses to light, for the purposes of helping our Members make profits at PSW, we live by a very simple rule:

We don't care IF the markets are rigged, as long as we are able to understand HOW they are rigged – so we can place our bets accordingly.  

SPY 5 MINUTEBy understanding the mechanics of the BS that passes for the stock market these days and undersanding the process involved, we are able to line our bets up with the manipulors – or against the manipulated prices to take advantage of the counter-moves when the crooks are done playing with them.  Certainly we never go more than a day without finding a good example!  

While Lewis focuses on the blatant front-running scam by high-frequency traders, we tend to look at the broader picture of the manipulation of indexes and the media by funds who have a whole bag of tricks to stampede the sheeple in and out of positions almost at will

We do that by focusing on the VALUE of stocks, not the PRICE and when PRICE becomes removed from VALUE, we look for a trading opportunity.  It's not a complicated system really, once you accept the fact that prices are, in fact, manipulated.  Today happens to be one of the 4 most-manipulated days of the year – the last day of the first quarter, when all the Banksters push stocks in their brochures to levels that will paint a pretty picture on their performance graphs.  

Sure there are some people pushing down and some people pushing up but it's not an even…
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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

Central Banker Admits Central Bank Policy Leads To Wealth Inequality

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Six years after QE started, and just about the time when we for the first time said that the primary consequence of QE would be unprecedented wealth and class inequality (in addition to fiat collapse, even if that particular bridge has not yet been crossed), even the central banks themselves - the very institutions that unleashed QE - are now admitting that the record wealth disparity in the world - surpassing that of the Great Depression and even pre-French revolution France - is caused by "monetary policy", i.e., QE.

Case in point, during the Keynote speech by Yves Mersch, ECB executive board member, in Zurich on 17 October 2014 titled "...



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Chart School

Time for the Pullback?

Courtesy of Declan.

Sellers were going to make an appearance at some point and today was the day they paid a visit. Whether a larger pullback emerges will depend on events over the coming days, but today's selling did emerge at some natural attack points for shorts.

The S&P finished with a 'bearish cloud cover,' but it did manage to hold declining resistance turned support, and the 20-day MA has entered the fray as an area for bears to work. But this wasn't the most bearish of the indices, and today's finish actually gives bulls a long play tomorrow (for a bounce off support).  Technicals also suggest a bounce.


While the S&P may give bulls something tomorrow, th...

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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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Phil's Favorites

Larry Swedroe: Use Valuations for Expected Returns, Not Market Timing

Larry Swedroe: Use Valuations for Expected Returns, Not Market Timing

Courtesy of 

When forecasting investment returns, many individuals make the mistake of simply extrapolating recent returns into the future. Bull markets lead investors to expect higher future returns, and bear markets lead them to expected lower future returns. But the price you pay for an asset also has a great impact on future returns. Consider the following evidence:

The average historical P/E ratio for the market has been around 15. A study covering the period from 1926 through the second quarter of 1999 found that an investor buying stocks when the market traded at P/E ratios of between 14 and 16 e...



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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

UPDATE: Brean Capital Initiates Coverage On GrubHub

Courtesy of Benzinga.

Related GRUB UPDATE: JMP Securities Initiates Coverage On GrubHub Inc Benzinga's Top Initiations Making Money With Charles Payne: 09/25/14 (Fox Business)

Brean Capital initiated coverage on GrubHub Inc (NYSE: GRUB) with a Hold rating.

Analyst Tom Forte noted that "catalysts for the stock include an accelerat...



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Sabrient

Sector Detector: Sharp selloff in stocks sets up long-awaiting buying opportunity

Courtesy of Sabrient Systems and Gradient Analytics

Last week brought even more stock market weakness and volatility as the selloff became self-perpetuating, with nobody mid-day on Wednesday wanting to be the last guy left holding equities. Hedge funds and other weak holders exacerbated the situation. But the extreme volatility and panic selling finally led some bulls (along with many corporate insiders) to summon a little backbone and buy into weakness, and the market finished the week on a high note, with continued momentum likely into the first part of this week.

Despite concerns about global economic growth and a persistent lack of inflation, especially given all the global quantitative easing, fundamentals for U.S. stocks still look good, and I believe this overdue correction ultimately will shape up to be a great buying opportunity -- i.e., th...



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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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OpTrader

Swing trading portfolio - week of October 20th, 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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Market Shadows

Falling Energy Prices: Sober Look takes a Sober Look

Falling Energy Prices: Sober Look takes a Sober Look

What do falling energy prices mean for the US consumer? Sober Look writes a brief yet thorough overview of the consequences of the correction in the price of crude oil. There are good aspects, particularly for the consumer, bad aspects, and out-right ugly possibilities. For more on this subject, read James Hamilton's How will Saudi Arabia respond to lower oil prices?  In previous eras, Saudi Arabia would tighten the supply to help increase prices, but in this "game of chicken," the rules m...



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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 this week's Stock World Weekly. Just sign in with your PSW user name and password. (Or take a free trial.)

#457319216 / gettyimages.com

 

...

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Promotions

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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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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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