Phil's Newsletter

Tumbling Tuesday – China Trade Data Adds to the Bear Case

Another $3,000 winner for you!  

Just like we did last Wednesday in the morning post, yesterday we laid our a Futures trading plan that has led to a $3,000 per contract gain on the Russell (/TF) Futures along with similar gains on the S&P (/ES), Nasdaq (/NQ) and Dow (/YM) all provided to you FOR FREE, right in the morning post, which was even published on Seeking Alpha (thanks to alert editors!) at 9:08am – plenty of time to play before the market opened and we started dropping.  Merry Christmas and Happy Chanukah to all of our fans!  

We also reiterated that fabulous SDS hedge that once again is paying off huge and we'll be discussing that, along with our Futures trading, in this afternoon's FREE Live Trading Webinar at 1pm, EST.  We hold these Webinars once a week and usually they are for our Members only but once a month we like to invite everyone in for a look and, who knows, maybe you'll realize it is worth learning what we have to teach you about Options, Futures, Portfolio Management and Trading Techniques.   

As you probably know, we are currently "Cashy and Cautious" in the markets and our main portfolios (Long and Short-Term) are well-balanced, while our Butterfly Portfolio is self-hedged – so we don't have to worry about that one.  Our most bullish portfolio is our Options Opportunity Portfolio, which you can join over at Seeking Alpha, and that one has taken a hit this month – but nothing we didn't expect as we added many bullish positions and our hedges have yet to kick in. 

That makes it a great time to add new positions like, for example, in the Options Opportunity Portfolio we have a simple hedge using the Nasdaq Ultra-Short (SQQQ), where the March $15 calls are now $3.50 so we bought 30 of those ($10,500) and sold 30 of the March $20 calls, now $1.50 ($4,500) for net $2 ($6,000) on the $5 ($15,000) spread.  That gives us a $9,000 hedge in our $100,000 portfolio should the Nasdaq turn south and, best of all, SQQQ is already at $17.78, so the hedge starts out $2.78 in the money ($8,340) and we can only lose if the Nasdaq…
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Monday Market Madness – Oil Below $40

Total insanity!  

star wars animated GIF

The S&P went down 2.5% and then up 2.5% in less than 48 hours, ostensibly driven down by Mario Draghi first failing to provide the QE measure he had been promising at the actual ECB meeting and then going back up on Friday because he promised more QE at the next meeting.  The man is a serial liar yet EVERY SINGLE TIME the markets take him at his word – it's MADNESS!  



What was really strange about Friday is so many more stocks making new lows than new highs during a 2% rally.  Also, in a real rally – there's usually a LOT more advancing than declining volume. 

Money if flowing into equities because, like Richard Gere, it simply has nowhere else to go.  With negative interest rates, if you put your money in the bank, it's GUARANTEED to get smaller.  The Housing and Commercial Real Estate markets are still fairly dead and usually perform poorly in rising rate environments, Precious Metals aren't precious anymore, Energy Investing is suicide and the last time the Fed had a tightening cycle in the 90s, the value of 10-year notes slipped 75% – no one wants to be caught in that trap again.   

Still, I don't believe in a rally that has no Fundamental basis.  Just because money is being forced into the market – that doesn't mean I should follow it when I'm not being forced.  That's just lemming-like behavior and we, as humans, strive to be better than that, don't we?  I know it's hard when ALL of your friends are jumping over a cliff not to do so yourself – especially when you can hear them shouting "wheeeee!" on the way down so you're sure they are having fun and things can only get better at the bottom, right?  

OPEC failed to curtail production at Friday's meeting and oil is diving below the $40 mark and the biggest economic issue we are ignoring in the US is the impact these prices…
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$3,000 Friday – Profits from the Future(s)

Another HUGE winner! 

That's $5,500 in two days using the Futures Trade Ideas we published right here in our morning post on Wednesday and Thursday but, sadly, not for my readers at Seeking Alpha, where the editors felt yesterday's post was "more of a marketing pitch than investment commentary" and rejected it.  You see, on Wednesday, we had 3 Futures Trade Ideas which made our readers $2,500 and on Thursday I talked about how well they went – so that was considered to be a promotion of our services – where we have trade ideas like these for our Members every day.

Of course, if we don't let you know how our prior trades went, then the new trades will seem like random picks and, without context, they would be difficult to understand.  The same goes for our slow-moving portfolio strategies, where we do not promise quick returns like other service but focus on a BALANCED Portfolio Model using our "How to Get Rich Slowly" techniques over longer periods of time.  

It's not like we don't know how to make short-term money – that's what I got in trouble for at SA because on Wednesday I said:

The S&P gets to 2,100 and we short /ES Futures at 2,100 (with tight stops above the line) and Russell (/TF) Futures below the 1,200 line and Nikkei (/NKD) Futures below the 20,000 line and then, tomorrow or Friday, I'll tell you how much money we made shorting and you'll say "why do I never catch these great trade ideas" and I'll say it's because you're not patient enough to wait for the pattern to reset itself and just make the obvious play.  

This is the 11th time the S&P has been over 2,100 since May and, so far, it's been like a little money machine for us all year long on the short side.  I know this time may be different and

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$2,500 Thursday – Our Trade Ideas Pay Off HUGE!

See, I told you how easy it is:

In yesterday's morning post (which our Members have access to pre-market) I told you that tomorrow (today) I would tell you how much money our Futures shorts made and that most of you would say "why do I never catch these great trade ideas."  Our three Futures shorts did, in fact, make $2,500 PER CONTRACT as a group and even this morning, just in case you missed yesterday, I put out another alert to our Members AND tweeted it out for free – to short the Russell (/TF) Futures again at 1,200 ahead of the ECB decision.  

This isn't complicated folks – this is what we teach you how to do if you want to take control of your financial future.  Yesterday was the 11th time the S&P had been rejected at 2,100 and this morning we saw more weakness but the S&P didn't get back to 2,100 but the Russell was back to 1,200, where we shorted it yesterday – so we shorted it again this morning – but we're taking the quick $500-1,000 off the table today as we expect the real meat of the ECBs decision to come in their 8:30 press conference so this morning's trade was much shorter-term.  

We don't give away free trade ideas during earnings months but yesterday I thought everyone could use a nice holiday boost so we gave you all a very easy one.  I would say don't be afraid of Futures trading but I'd hate for you to get the wrong idea – you should be VERY AFRAID of Futures trading because it's a very powerful tool but not having it in your trading toolbox is like not having power tools if you are carpenter – you might get the job done but it will take 5 times longer and you'll exhaust yourself for no good reason.  

The key to our success in Futures trading is that we do not trade the futures all that often.  We only trade the Futures when our FUNDAMENTAL analysis indicated they are mispriced and when we feel the trade is very obvious.  Even then, we only have a 60-70% winning percentage but, combine that with

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Which Way Wednesday – S&P 2,100 Yet Again

This is getting tedious

The S&P gets to 2,100 and we short /ES Futures at 2,100 (with tight stops above the line) and Russell (/TF) Futures below the 1,200 line and Nikkei (/NKD) Futures below the 20,000 line and then, tomorrow or Friday, I'll tell you how much money we made shorting and you'll say "why do I never catch these great trade ideas" and I'll say it's because you're not patient enough to wait for the pattern to reset itself and just make the obvious play.  

This is the 11th time the S&P has been over 2,100 since May and, so far, it's been like a little money machine for us all year long on the short side.  I know this time may be different and the last 10 times may have been different too, which is why we stop out if we don't get confirmation from the other indexes that things are toppy but, when it works – it's good for $250, $500, $1,000+ PER CONTRACT in the Futures at $50 per point to the downside. 

SPX WEEKLYAs usual, the Dow is at 17,850 (/YM) so that's a confirming line we like to watch but the Nasdaq is now leading us higher at 5,156 but that's still, unfortunately, shy of our November high of 5,163 so let's not call this time different until we see that beat and THEN we'll look for the July high at 5,231.  That's right, we've done all this before and nothing is different this time at all!  As noted by Dave Fry:

Markets move higher given belief the ECB will cut interest rates Thursday. This belief trumps a host of bad economic data so far this week. Tuesday bulls ignored a substantial drop in manufacturing activity as manufacturing reports showed substantial declines. The PMI Mfg Index declined to 52.8 vs prior 54.1 and the ISM Mfg Index imploded to only 48.6 vs prior 50.1. Construction Spending did improve modestly to 1% vs prior 0.6%. But at the same time retail store sales slumped 10% year over year on the wacky Black Friday holiday shopping.

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$225Tn Tuesday – Global Debt Drives the Economy


Global Debt is up $147Tn in 20 years.  That's $7Tn a year or about 10% of our Global Economy has been debt-driven.  Meanwhile, the Global GDP grew $50Tn over the same 20 years, which is $2.5Tn per year or 5% so, in simple terms, our debt is growing twice as fast as our economy.  

This is why there is a global push for 0% interest rates – 1% of $225Tn is $2.5Tn – that's 100% of our growth getting sucked up by interest payments.  2% would chop $2.5Tn off the growth, 3% rates would pull $5Tn out of the Global Economy, 4% $7.5Tn (10%), 5% $10Tn, 6% $12.5Tn…  I know you can do the math but have you really thought about these numbers?  

How can we ever go back to "normal" interest rates when just 3% would devastate the Global Economy?  Just take a look at the energy patch, where the EIA is showing that US onshore oil producers' debt service is already taking up 85% of the cash flow – even at these incredibly low rates:

This is much worse than last December (70%) and December is the month in which lenders are to reassess E&P companies’ loans conditions based on their assets value in relation to the incurred debt.  Also, oil was $100 a barrel in mid-2014, so the oil companies WERE still swimming with cash at the end of last year – not so much this year – especially for those who squandered it on buybacks or weak M&A deals. 

How long will this charade continue?  Actually, it can go on for quite a while as long as the Fed, the ECB, BOJ, BOE, PBOC, etc. are all willing to keep playing.  The ECB meets Thursday and it's widely anticipated they will double down on even lower rates and even more Quantitative Easing, which will then open the door for another round of Global easing and rate reductions – game not over by a long shot.  

As you can see, both Europe and the US are nowhere near Japan's radical stimulus levels and China is also pumping it up at an amazing pace.…
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Cyber Monday Window Dressing – November Ends with a Bang


Those are the odds that Draghi will provide more stimulus in Europe this Thursday based on the recent speeches he's been making.  That means, most likely, that it will be a "sell on the news" even at the rumor has already been bought – sending the DAX up 500 points (5%) in 5 days.

The ECB Deposit Rate has already been at -0.1% since June and is expected to go down to -0.3-0.4%, which is an actual penalty for banks who wish to store their cash with the ECB, rather than lending it out to the Private Sector.  While this will, of course, be a boost for the Private Sector, keep in mind that the banks who have looked at their books and analyzed their prospects have to be FORCED to lend these businesses money.  

As with many of our economic "solutions" since the 2008 crisis – this one simply masks one problem (businesses are not worth lending to) with another (forcing banks to make bad loans again) and now we can stagger forward for another few years until our banks need bailing out because they have too many bad loans – again.  

The evidence from the eurozone, Switzerland and Scandinavia is mixed. The worst-case scenarios of cash-hoarding and broad-based asset bubbles, due to plowing money into investments such as real estate, haven’t materialized. But despite the negative rates, Switzerland’s central bank, which sees the franc’s exchange rate against the euro as key, still has a stronger currency than it would like. In the ECB’s case, any transmission to private-sector lending has been modest at best.

Still, ECB officials are convinced that negative rates and large-scale asset purchases are a powerful combo to boost activity and prices by increasing the incentive to lend to households and businesses rather than accepting tiny or negative returns on government bonds or deposits at the central bank.

Meanwhile, let's pretend the real economy matters and talk about Black Friday, Cyber Monday and the Holiday Shopping Outlook – just for fun!  

Of course our Corporate Media, after a word…
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Fully Stuffed Friday – Markets Popping or Dropping?

SPX DAILYWhat an interesting year it has been.

On the whole, the markets have gone nowhere and it's up to December to either make or break a positive close for 2015.  As you can see from Dave Fry's S&P 500 Chart, we had a big "W" pattern that seems to be leading into an "M" pattern that, on the whole will drag us back down to about 2,000 at some point.

That point, however, plus or minus 2 weeks, will make or break the markets in 2016.  Brokers need to have a good finish to 2015 or their brochures for 2016 investing won't look attractive enough to get customers to pull their cash off the sidelines – especially in a rising rate environment.  At the moment it's "sure bonds were only good for 3% last year but stocks were down" – that's NOT a good way to get baby boomers to cash in their bonds and open a new trading account, is it?  

And Americans are saving.  After all – it's a Recession.  Just because the Government doesn't want to call it a recession and the Corporate Media isn't even allowed to say the word – it doesn't mean it isn't happening and the consumer spending data clearly indicates recessionary behavior has certainly taken hold.

Very sadly, looking at this BLS chart of Consumer Spending, the average family spends more after-tax money than they earn and that really doesn't leave a lot of growth for economic expansion in a country where nearly 70% of our GDP is consumer spending.  Savings is not even a category on this chart – for goodness sakes!  

As we know, less money has gone to gasoline this year and it was hoped that the savings would flow to other spending but that has not been the case as the average 48 year-old consumer is, of course, a little concerned with all this campaign talk about cutting the Social Security checks they expect to begin collecting in 17 years.  

I know this may come as a shock to 9 out of 10 "experts" they trot out on TV to explain things to you but, when you don't raise salaries, then all the consumer can…
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Why Worry Wednesday – Give Thanks for Invincible Markets

What do we have to be thankful for?  

We should be very thankful that even a horrific terror attack on a major Western city becomes yet another reason to rally the markets.  Oil prices shot up 5% yesterday but we rallied just as hard as we do when they fall – one is good for XOM, CVX and others and the other is good for consumers, whose confidence fell 10% between October and November and that was BEFORE the terrorist attacks we are not at all worried about.  

Sure, what do consumers know?  Their spending barely makes up 70% of our GDP so why pay attention to their mood when there are stocks to buy, right?  Economic Confidence is also fading fast and confirms the poor consumer numbers but hey – we're only 50% lower than we were last December – I'm sure we'll be fine if we just ignore it…

U.S. Economic Confidence Index Components -- Weekly Averages Since November 2014

Norway's Consumer Confidence is also fun to ignore:

Investors probably don't know anything either so we can also ignore State Street's Investor Confidence Index as it re-tests the year's lows.  

See – isn't it fun to ignore things!  Even Europe is ignoring things as their markets are fully recovering from yesterday's drop this morning.  How silly of us to think that any market sell-off would be allowed to stand!  

Clearly our leaders are too TERRIFIED to let the markets even have a normal correction for fear that we all melt-down like China, which has been struggling since October to get it's act together (we're short FXI at $41):

Nobel Prize-Winning Economist, Joe Stiglitz has agreed with my premise (see Friday's post)  that Mario Draghi is full of crap and that his is merely "papering over the cracks that are caused by the faulty design of the currency bloc."  According to Stiglitz (and myself), Draghi's assurances that he will do "whatever it takes" to boost the Euro-Zone's economy simply distracted…
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Trickle Down Tuesday – Markets Pull a Slow Fade into Holiday

SPY  5  MINUTEGoing down!  

You can't draw any conclusions from these low-volume trading days but, in general, stocks have been in retreat and this morning the news of Turkey shooting down a Russian jet fighter did not help the mood one bit as European markets dove 1.5% and our Futures followed down half a point (so far).  

I already sent out a News Alert to our Members and, if you follow us on Twitter, you already saw it – so I won't go over all the details and possible repercussions again.  Needless to say World War III would be kind of a bummer so let's hope things don't escalate.  Fortunately, Vladimir Putin is well known for his diplomatic restraint.

The US State Department has already issued a Global Travel Alert that's likely to put a damper on holiday cheer this year.  Paris is already seeing a slump as airline bookings into the city are down 13% – enough to put a serious dent in the travel industry's bottom line.  I was in NYC this weekend and my children got to see heavily armed police hanging out in Times Square and it was way too easy to get stand-by show tickets on Sunday (but we knew it would be, that's why we decided to go).  Buffett's admonition to "be greedy when others are fearful" applies to more than just stocks…

Brussells has become a complete ghost town as the Government there is hunting for terrorists in the capital – not even the subways are running as the ECB must be protected at all costs, of course.  It is in this environment, amazingly, that I have gotten tons of messages and comments in the past week telling me I'm too bearish and the markets will fly on the biggest Santa Claus Rally of all time.  It really does scare me that so many investors believe in Santa Claus, not to mention the Fed.  

I'm tired of explaining why I'm more comfortable being in CASH!!! into the end of 2015 but David Stockman isn't, so you can hear his interview where he makes the case that the Fed is very
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Phil's Favorites

Today's Quiz: Donald Trump, Bernie Sanders, Hillary Clinton - Who Said It?

Courtesy of Mish.

It’s quiz time.

I will list a statement. You decide who said it.

The correct answer is either Bernie Sanders, Donald Trump, or Hillary Clinton.

34 Statements – Who Made Them?

  1. I do not believe in unfettered free trade. I believe in fair trade which works for the middle class and working families.
  2. I will take on corporations that take their jobs to China.
  3. I think NAFTA has been a disaster.
  4. Instead of passing such trade deals again and again, we must develop trade policies which demand that American corporations create jobs here, and not abroad.
  5. TPP is a death blow for American manufacturing.
  6. I’m for free and fair trade.
  7. We need to bring manufactu...

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Zero Hedge

Is A New Banking Crisis Imminent? Recent Rise In Delinquency Rates Is Shocking

Courtesy of ZeroHedge. View original post here.

Submitted by Olav Dirkmaat via UFM Market Trends,

The delinquency rate on loans is key in understanding banking. It answers one question: what percentage of loans is overdue for payment? The delinquency rate is by far the most useful indicator for “credit stress.” It seems, however, as if delinquency no longer counts. Few are paying attention to the quick and sudden rise of the delinquency rate. What does...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Get Ready to See This Globalization 'Elephant Chart' Over and Over Again (Bloomberg)

Globalization was the driving force behind the growth miracle in emerging markets, lifting millions of people out of poverty over the past few decades.

America’s shrinking middle class is killing the economy (Business Insider)

The middle-income class is hollowing out and it's hurting US economic growth. ...

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Chart School

Market Recap Jun 28, 2016

Courtesy of Blain.

Indexes gapped up sharply at the open, and stayed firmly in the green all day with a round of buying into the close.  The S&P 500 gained 1.78% and the NASDAQ 2.12%.  In case you haven’t noticed, it’s been pretty volatile out there the past week.   But all in all after all the hysteria, U.S. markets finished down about 2% from where they were a week ago – not quite the “zombie underworld” we were warned about if Brexit came to pass.

“I think it was just a market that got a little ahead of itself to the downside,” said Robert Pavlik, chief market strategist at Boston Private Wealth.  “A little bit of ‘cooler heads are prevailing’ and seeing this as an opportunity to get in. How long it lasts is going to be the big question...

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Kimble Charting Solutions

London closer to breakout, than breakdown- Really???

Courtesy of Chris Kimble.

While the media is focused on the noise around Brexit, yesterday the Power of the Pattern shared that Germany (DAX) and London (FTSE) remained above 6-year rising support. See post HERE.

Below takes a closer look at the FTSE index in London, the so called center of the news noise.



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Bill Gross on 'What'd You Miss'

By Jacob Wolinsky. Originally published at ValueWalk.

Bill Gross on ‘What’d You Miss'”>Bill Gross on ‘What’d You Miss’

Streamed live 5 hours ago
Today on ‘What’d You Miss,’ co-hosts Scarlet Fu & Alix Steel bring you live coverage of the market close and talk to Standard & Poor’s Chief Global Economist Paul Sheard about the G7 meeting. We’ll also bring you Erik Schatzker’s interview with Bill Gross, live from FI16 in Los Angeles ( We’ll hear from the bond king on central bank policy and his outlook for global growth.

‘What’d You Miss’ with Alix Steel, Scarlet Fu, and Joe Weisenthal airs every weekday on Bloomberg TV from 4 – 5 pm ET:

The post ...

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Swing trading portfolio - Week of June 27th, 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 ...

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Mapping The Market

Thoughts on Brexit

I have mixed feelings about Brexit today. Clearly the European institution need reforming. The addition of so many countries in the last 20 years has created a top heavy administration. The Euro adds more complexities to the equation as the ECB policies cannot fit every country's problem. On the other hand, a unified Europe has advantages as well – some countries have benefited from the integration.

For Britain, it's hard to say what the final price will be. My guess is that Scotland might now vote for independence as they supported staying in Europe overwhelmingly. Northern Ireland might be tempted to leave as well so possibly RIP UK in the long run. I was talking to some French people and they were saying that now there might be no incentive for France to stop immigrants from crossing over to the UK like they do now and simply allow for travel there and let the UK deal with them. The end game is not clear to anyone at the moment....

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Digital Currencies

Bitcoin Tumbles 10%

Courtesy of ZeroHedge. View original post here.

One week ago, when bitcoin first crossed above $700 on the seemingly insatiable Chinese buying which we forecast last September (when bitcoin was trading at $230) would take place as a result of China's capital controls (to much pushback by the "mainstream" financial media), we tried to predict what may happen next. We said that "it could go much higher. That said, anyone who bought last September when the digital currency was trading at $230 may be advised to take some profits, and at least make...

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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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This Is Why Biotech Stocks May Explode Again

Reminder: Pharmboy and Ilene are available to chat with Members.

Here's an interesting article from Investor's Business Daily arguing that biotech stocks are beginning to recover from their recent declines, notwithstanding current weakness.

This Is Why Biotech Stocks May Explode Again



After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.


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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, ...

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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 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!

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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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