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Phil's Newsletter

Stock Market March Madness – Quad Witching’s Big Friday Finish

SPY 5 MINUTEWe're ending the first quarter with a bang.

Our quarter ends 10 days early because stock options expire today and quarterly Futures contracts roll over.  Next week is just the end game for the retail schmucks.   As you can see from Dave Fry's SPY chart, up volume yesterday was about 60% of the down volume on Wednesday but it COMPLETELY reversed Wednesday's drop – despite the fact that 60% more people sold than bought over the two-day period

This is how we manipulate the markets to make it LOOK like the indexes are holding up when actually we are selling our shares and cashing out.  It keeps the retail suckers buying, especially when paid pumpers like Jim Cramer and the crew at CNBC are on the air 24/7 telling you to BUYBUYBUY and IGNOREIGNOREIGNORE any negatives – just like they did during the 2008 crash.  

Maybe this time is different, maybe there's another reason a TV station that averages just 52,000 viewers in the 25-54 key demographic, remains on the air – other than just being a propaganda device for the top 1%.  Certainly they aren't viable on their own merits as you can reach more people standing in Times Sqare with a megaphone.   

Is it a sign of a market top when CNBC only has an average of 52,000 suckers tuned in at any given moment?  Sadly, in these thin market volumes, 52,000 sheeple mindlessly following Cramer off a cliff can still move the markets, so we have to torture ourselves daily and pay attention to what CNBC is saying as neither Fox Financial or Bloomberg have managed to match CNBC’s impact for moving the markets.  

Even now, when I go to visit brokers on Wall Street, every office has TVs tuned to CNBC (maybe they are not Nielson families), even though, clearly, the broadcasts did nothing at all to help Wall Street avert the last crash and, in fact, many would argue that their mindless trend-following and their constant cheer-leading for the latest
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Thursday Failure – Big Bounce Lines Falling Short Ahead of Quad Witching

SPY 5 MINUTESo close and yet so far.  

Last week, we set our 5% Rule's™ "strong bounce" goals for this week at Dow 16,300, S&P 1,860, Nasdaq 4,300, NYSE 10,400 and Russell 1,190 and yesterday we finished at Dow 16,222, S&P 1,860, Nasdaq 4,307NYSE 10,359 and Russell 1,195 - not bad for estimates made a week ago but still not good enough to flip us bullish again.

Of course, we knew that yesterday morning, when I called for shorting the Futures at 16,300 on the Dow (/YM), 1,865 on the S&P (/ES), 3,700 on the Nasdaq (/NQ) and 1,200 on the Russell (/NQ) and this morning we're at 16,100 on the Dow for a $1,000 per contract gain in 24 hours, 1,848 on the S&P for +$850 per contract, 3,665 on the Nasdaq for +$700 per contract and 1,187 on the Russell for +$1,300 per contract there.  

If you'd like to get alerts on these trades sent to your inbox or to get these posts and trade ideas before the markets open or live picks during market hours - you can sign up HERE.  

USO WEEKLYIn Friday's post, we were shorting the S&P Futures at 1,870, that's another $500 per contract if you were paying attention at the time!  In Tuesday's Live Trading Webcast (replay here), aside from reiterating our Futures shorts, we also added the WYNN March $230 puts at $1.05 at about 1:30 pm and they closed the day yesterday at $2.40 – up 128% but we took the money and ran at 65% – we're not greedy…

They aren't all shorts.  We went long on oil (briefly) yesterday morning and, on Tuesday morning, I pointed out 5 long trade ideas - right in the morning post - and we took the money and ran yesterday with 4 of 5 closed out as winners and the CMG April $620 calls at $8 closed yesterday at $17 – up 112% in two days.  This is why we can be comfortable going back to CASH!!! in a choppy market – we can always find fun things to trade – in any…
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Which Way Wednesday – Fed Edition

INDU WEEKLYIt's Yellen time! 

The last Fed statement came out on January 29th and, as you can see from Dave Fry's Dow chart on the right from Feb 3rd, it was not INITIALLY well-recieved.  We had already been heading lower into the announcement and we fel another 400 Dow points in the next 3 sessions (see our February Trade Review for details).

This time is already different as the Dow is already UP 300 points this week, back at 16,336 as we survive another round of tapering (first was Dec 18th and we rallied after selling off into the meeting).  This will be the first time since the taper began that we rallied INTO the meeting so we set ourselves up to be disappointed with a TZA hedge (see replay of yesterday's Live Trading Webcast), but that didn't stop us from picking a lot of great, bullish, bottom-fishing trades (also see Webcast). 

In fact, that's what a hedge is for – to lay the groundwork for more buying – in case we are tempted to move our cash back from the sidelines.

Tempting though it may be, we're still "Cashy and Cautious" into the Fed Meeting this afternoon (2pm with Yellen speaking at 2:30) and we're also shorting the Russell Futures (/TF) below the 1,200 line, Nasdaq Futures (/NQ) below 3,700, Dow Futures (/YM) below 16,300 and S&P Futures (/ES) below 1,865.  Generally we look for 2 of the 4 to be under and then we short one of the laggards when they cross - simple and effective.  

We already picked up $100 of Egg McMuffin money with a long play on oil (/CLK4) as the May contracts are a full $1 below the April contracts (/CLJ4), which is a bit stretched as the NYMEX crooks only have two sessions left to roll their fake 58M barrels worth of April orders into fake May orders – so we expected a spike in demand for May contracts today but only playable over the $98.50 line with tight stops and we're still liking SCO at $30 as an overall short on oil because they still have to dump it eventually.  The April $30 calls are just .90 and SCO was at $31.27 on Monday.

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Turnaround Tuesday – Strong Bounce Tested Already

What a ride!  

In a single day we make up 40% of the week-long drop on the Dow and the S&P and this morning we're up again in the Futures, despite Putin making a speech in which he says Russia WILL annex Crimea – despite all threats of sanctions, etc.  

In fact, Russia is now sanctioning US, banning our officials from visiting their country and freezing any assets our Congresspeople may have in Russia.

Whether or not this spreads to Corporate assets – who knows?  But what difference would it make – the market would still go up anyway because no news seems to matter.  

GXC WEEKLYJapan has a looming sales tax increase in two weeks that most analysts say will be a complete disaster in the World's 3rd largest economy, China's Yuan is dropping and it's killing local companies and investors in China and it's already showing up in slowing home prices as well as property defaults.  Like Japan, China's debt is now 238% of their GDP and economist Diana Choyleva notes:

"Debt in China over the past five years has grown much faster than in Japan at the same stage of development. Studies show the rate of increase in debt is as important, if not more important, in precipitating a crisis than the absolute level of debt. On that front, China scores extremely poorly. Japan’s debt didn’t start to rise at a similar speed until the mid-1980s. China’s debt has surged sooner because its economy is much bigger than Japan’s was. The world is just not big enough to let China continue to increase its income per capita and waste its savings on a vast scale for years to come. The financial crisis was the beginning of the end of China’s export and investment-led growth model."

.SPX WEEKLYShe says China is rapidly approaching a "Bear Stearns Moment."  Meanwhile, the US is experiencing 3.5% food inflation, which is more than twice the rate at which salaries are increaseing and 5 times
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Monday’s Market Movement is China’s Farmers Being Forced into Cities

The indexes are bouncing this morning! 

Things didn't look too interesting earlier this morning but now we've got our expected and predicted 0.5% weak bounce thanks to CHINA!!! unveiling their plan to push another 100M people into the cities by 2020.  Did I say plan?  More like insane scheme, actually.  

While 100M may not seem like a lot to China, it's still 8% of their population – that would be like the US moving 8M families to the cities in 6 years.  Imagine the chaos and upheaval, the strain on urban resources and the collapse of the rural areas they leave behind.  

Still, only the good side is being seen by the markets and copper shot up from our bottom call at $2.925 to $2.975 (5%) in the 3 hours following the 3am announcement and global markets jumped 0.5% as computer programs that still think copper is a major indicator began BUYBUYBUYing on what must be some good news somewhere.  

So that's the nature of the WEAK bounce we're seeing this morning.  We'll take it more seriously when it's a 1% strong bounce and, if that holds – THEN we'll consider getting on board but a weak bounce off news that China is going insane with infrastructure spending doesn't give us a whole lot of confidence in the market having any real strength:

The plan repeated previous government statements on allowing farmers more freedom in selling or leasing their land. It gave no timetable or specific targets.

Some smaller cities have already eased their hukou controls, which also tie benefits to a family's residential status, to attract more rural laborers. But these efforts have only been partially successful because many people prefer to move to large cities for better job opportunities and public services.


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PSW February Trade Review – Part II

We got off to a hell of a start

Part one of our trade review was a very busy week where we went bottom-fishing with 46 trade ideas (mostly bullish) in just one week and only 7 of them were misses for a very nice 84% success rate to start off the month.  

Of course bullish trade ideas are like shooting fish in a barrel when the market goes up and up like this – the smart part is that we had 46 of them and that we went heavily bullish in the last week of January, right when we were bottoming – giving us the best possible prices.  

RUT WEEKLYThat's why these channels are so important to watch, we trade inside of them, playing the odds that the tops and bottoms will hold and we try to catch the turns.  That's why, at the moment, we are BEARISH – until and unless we break over the tops of our channels – at which point we can go back to betting on new highs.  

Most of the trade ideas we review here are from inside the daily PSW Member Chat Room (and you can join here) but some are right in our morning posts, which you can have delivered to your mailbox via our Report Membership, while it's in progress, at 8:30 ALMOST every morning (some mornings I miss the mail-bot deadline).  In fact, today I'll put a couple of **'s next to trade ideas that were in the morning post – just to see how well those work out.  

Feb 3:  Meaningless Monday – Waiting on China

At the moment (7:50 am) our Futures are doing what they usually do in the morning – rising on very low volume.  We went long in Member Chat already (6:44) because you don't have to show us the same move 10 times in a row before we finally get it.  Already we picked up a nice move off the bottom with our /NKD longs up 50 points already ($250 per contract) and the Dow (/YM)

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Failing Friday – Not even a Weak Bounce?

3-13-2014 4-24-27 PM Roller CoasterWheeeee, what a ride!  

I don't think I could have been more clear on Tuesday that CASH!!! was the way to go, with 6 mentions of going to CASH!!! in the morning post alone.  All my logic and reasoning is right there and, on Wednesday morning, I was still yammering on about going to CASH!!!  Our primary hedge (delivered right to our Subscribers in our Morning post, pre-market)  was the TZA April $14/17 spread at $1.05, offset by the sale of the $14 puts at .50.  That hedge was net .66 at Tuesday's close (but back to .50 on Wednesday) and .89 yesterday – gaining 35% on a 2.5% drop in the Russell.  If TZA stays were it is ($15.60) that spread goes up to $1.60, for a 220% gain from our initial entry.   

That means you can protect a $100,000 portfolio against a 2.5% loss with just $1,200 committed to a spread like this.  That's what we mean when we teach you to BE THE HOUSE – Not the Gambler.  

Today, at noon EST, I'm doing a special Live Webcast where we'll be discussing another Stupid Hedge Fund Trick: "How to Buy a Stock for a 15-20% Discount" and you can click on that link for a FREE sign-up (and we'll Email you a replay if you can't view it live).  

If all goes well, we'll get another nice dip to buy into – just like our hugely successful February Trade Ideas – which we just reviewed in Part II of our February Trade Review and SHAME ON YOU if you didn't take those huge profits and get back to CASH!!! when I told you to (over and over and over again).  

At the time, we were long on /NKD at 14,500 but yesterday, right in the morning post (which our Members get pre-market EVERY DAY), with the Nikkei at 14,700, we had already gained $3,500 per contract from our 15,400 short call last Friday morning (again, our Members get actionable trade ideas every day) but we weren't done with the short as I said:

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Faltering Thursday – China’s Downhill Move Picks up Steam


China is the reason so many companies tell you how great their prospects are.  TSLA is going to China, YUM and MCD sell so much fast food in China that now Chinese people are getting fat and having heart attacks – just like we do!  Casinos make their money in China, luxury goods manufacturers do significant portions of their sales there and, of course, it's the raison d'etre for the commodities industry.  

But what if China is a fairy tale and, rather than a decade of growth ahead, we have a decade of stagnation or, even worse, contraction on the other side of the World?  As you can see from Dave Fry's FXI chart, the Chinese market has gone nowhere this whole decade – DESPITE the S&P starting 2010 at 1,100 and gaining 68% since then.

The WSJ has a nice list of "China's Rising Risks" including:

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Wednesday Wheee! Our Oil Shorts Pay $6,500 Per Contract!


We hit our $98.50 goal line on oil and that's up $6,500 per contact from $105 at the beginning of the month, where we went heavily short.  When oil was at $102.50, on Feb 21st, I said to our Members:

Oil – You can play it either way off the lines.  The reason I play short is because, over the long-term (3 months), I don't see oil sustaining $100 so, if oil goes to $105 on a violent pop, and I'm down $2,500 per contract, I don't mind doubling down to raise my net to $103.75 and, if it goes up to $106.25, I don't mind doubling down again to average a very big position at $105 average and sitting on it for as long as it takes to get real. If I were betting oil up and it dropped $2.50, however, I'd feel like a complete moron and I'd have no desire to DD and then I'd be hopelessly out of position and miserable and if it dropped another $2.50, I'd only feel stupider.  That's why I prefer to play the side I have conviction on but, believe me, in the course of my own 10,000 hours – I learned that the hard way!  

Realistically, if you think direction doesn't matter – you probably shouldn't be playing with Futures – other than very quick nickel and dime trading off support and resistance lines – which is how most people do play them (the beautiful sheeple).   Thank goodness for them, they provide the "liquidity" that goes into our pockets!  

Oil peaked out on March 3rd at $105.22 over the Ukraine issue.  That's still not resolved but, as we expected in the morning post, it still wasn't enough to sustain $105 on oil.  In fact, our first trade of the morning in Member Chat was the USO April $38 puts at $1.25 and, already, they closed yesterday at $2.40 – up 92%, but they should look better this morning and we'll take that 100% gain and run when it comes so quickly.  …
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Toppy Tuesday – Return of the Spitting Cobra

Not a good chart pattern. 

As you can see on our Big Chart, we are beginning to form a "Spitting Cobra" pattern and those generally resolve to the downside – much like it did in mid-January, when I warned you about it on 1/15, a week before we began a 1,000-point drop on the Dow.  At the time, I said:

Speaking of reality – we're still waiting for the S&P to confirm the bull is back by popping over 1,850 again and the Dow is pathetic under 16,400 (our 2.5% line).  They NYSE is over the 2.5% line at 10,250 so, IF the rally is real, the Dow should have no trouble making that leap today.  If not, we'll, these Spitting Cobra chart patterns can be very tricky – you never know when they are going to strike!  

INDU WEEKLYWe're still early in the formation but the fact that the Dow is STILL stuck at 16,400 does not bode well and, if the S&P fails 1,850 and the NYSE fails 10,250 – it would certainly be time to brace yourself for another good drop – especially if you haven't already heeded my call to get back to cash at what still seems like a market top.  

What's really bothering me more than anything is that SPY volume yesterday was 71.4M, about what we get on a half-day holiday (see Dave Fry's chart).  On the NYSE, only 1.07Bn shares were bought to the upside but they were swamped by 1.9Bn shares of decliners.  This indicates that the Big Boys are trying to dump shares en masse, but simply can't find any buyers.  

Maybe I'm wrong.  Maybe we shouldn't worry about China's defaulting bonds, or the missing plane, or the Ukraine, or Japan's slowing economy, or Europe's disappointing numbers, or declining US Retail Sales or the sky-high valuations of equities… Maybe.  And, if not, we can use our cash to buy more stuff.  

As you can see from our February Trade Review, we were 39 and 7 (84% accurate) on our picks in the first week and 35 and 4 (89% accurate) in

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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!


Chart School

Exclusive Today! Richard Bernstein Live on Playing the Bond Market

Courtesy of Doug Short.

Members of APViewpoint can attend today's upcoming live webinar/Q&A session with Richard Bernstein. Not a member of this free, secure, online advisor-only community from Advisor Perspectives? Sign up today!

Beyond Smart Beta: Global Opportunities in Equities and Bonds

Tuesday, September 30, 2014
4:15pm EST

Smart beta is a hot topic among advisors these days, but smarter beta management is far more important, according to Richard Bernstein Advisors CEO and former Merrill Lynch Chief Investment Strategist Rich Bernstein. In this webinar, he'll present his views of the global equity and fixed income markets, and offer insights into the importance of beta managem...

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Phil's Favorites

Schoolgirls Aged 14-16 Leave France, UK, Germany for Syria to Join ISIS Jihad

Courtesy of Mish.

As many as 63 seriously misguided teenaged girls from France, 40 from Germany, and 50 in the UK have left their countries to join ISIS in Syria.

The Guardian has a fascinating report on Schoolgirl jihadis: the female Islamists leaving home to join Isis fighters. Hundreds of young women and girls are leaving their homes in western countries to join Islamic fighters in the Middle East, causing increasing concern among counter-terrorism investigators.

Girls as young as 14 or 15 are travelling mainly to Syria to marry jihadis, bear their children and join communities of fighters, with a small number taking up arms. Many are recruited via social media.

Women and girls appear to make up about...

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Option Review

VIX Call Spreads Trade

The CBOE Vix Index topped 17.0 and the highest level since early-August on Monday morning amid declines in U.S. equities to start the trading week. The volatility index is off its earlier highs to trade 5.0% higher on the session at 15.65 as of 11:30 am ET. Options volume on the VIX is hovering near 360,000 contracts, or just more than 50% of the average daily reading of around 660,000 contracts. Calls are far more active than put options, as evidenced by the call/put ratio up above 4.2 in morning trading, perhaps as some traders position for volatility to stick around.

Large call spreads traded on the VIX today caught our attention as one big optio...

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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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Sector Detector: Stocks fight off predictable weakness, but expect more downside

Courtesy of Sabrient Systems and Gradient Analytics

Yes, the market showed significant weakness last week for the first time in quite a while. In fact, the Dow Jones Industrial Average moved triple digits each day. But it was all quite predictable, as I suggested in last week's article, and certainly nothing to worry about. Now the market appears to be poised for a modest technical rebound, and longer term, U.S. equities should be in good shape for a year-end rally. However, I still believe more downside is in order before any new highs are challenged. Moreover, market breadth is important for a sustained bull run, so the challenge for investors will be to put together broader bullish conviction, including the small caps.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, re...

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Swing trading portfolio - week of September 29th, 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

Ebola vs. Us

Ebola vs. Us

By Ilene 

Ebola is spreading too quickly for Ebola-vaccine makers to conduct typical studies of safety and efficacy on experimental vaccines. Instead, vaccines will be tested for basic safety, but then deployed with protocols devised now in order to test for efficacy essentially on the field. Testing has to be expedited because the situation in West Africa gets worse every day while there are no approved vaccines or other treatments.

The chart below is from a paper in the New England Journal of Medicine showing estimates of the virus's trajectory projecting out to November 1, 2014. If current trends continue...

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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.

The latest issue of Stock World Weekly is now available. Please sign in with your PSW user name and password. Or simply take a free trial to try out our weekly newsletter. 


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Last Chance! See The 'Google-Like' Trading Algorithm 'Live' TODAY

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When you register for the webinar, you’ll also get instant access to following trading videos:

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Digital Currencies

Making Sense of Bitcoin

Making Sense of Bitcoin

By James Black at International Man

Despite the various opinions on Bitcoin, there is no question as to its ultimate value: its ability to bypass government restrictions, including economic embargoes and capital controls, to transmit quasi-anonymous money to anyone anywhere.

Opinions differ as to what constitutes "money."

The English word "money" derives from the Latin word "moneta," which means to "mint." Historically, "money" was minted in the form of precious metals, most notably gold and silver. Minted metal was considered "money" because it possessed luster, was scarce, and had perceive...

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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 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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FeedTheBull - Top Stock market and Finance Sites

About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>