Phil's Newsletter

Will We Hold It Wednesday – Fed Minutes Edition

And here we are, yet again.

2,399.50 was the top for the S&P Futures (/ES) yesterday at noon so it's game on for our shorts as well as Russell (/TF) 1,380 and both are still hanging around those levels this morning.  As I said yesterday (and the 4 Tuesdays before that), we'll keep shorting at the top until it stops working.  Seems like a sensible plan, right?  

We're even more excited about our China Ultra-Shorts (FXP), which we've been tracking since April 3rd and currently, in our Options Opportunity Portfolio, we have 10 June $24 calls we paid $2 ($2,000) for on 5/15 after netting a $650 loss on our original spread so we're in for net $2,650 but FINALLY someone besides me has noticed how out of control China's debt situation is becoming as Moody's hits the Middle Kingdom with its first credit rating cut since 1989, saying that the outlook for the country’s financial strength will worsen, with debt rising and economic growth slowing.

"The downgrade reflects Moody's expectation that China's financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows. While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government.

"More broadly, we forecast that economy-wide debt of the government, households and non-financial corporates will continue to rise, from 256% of GDP at the end of last year according to the Institute of International Finance. This is consistent with the gradual approach to deleveraging being taken by the Chinese authorities and will happen because economic activity is largely financed by debt in the absence of a sizeable equity market and sufficiently large surpluses in the corporate and government sectors. While such debt levels are not uncommon in highly-rated countries, they tend to be seen in countries which have much higher per capita incomes, deeper financial markets and stronger institutions than China's, features which enhance debt-servicing capacity and reduce the risk of contagion in the event of a negative shock."

Isn't that exactly what I've been…
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Terrible Tuesday – Children Murdered, Markets Make All-Time Highs

22 dead and 56 injured.  

For those who don't have teenagers, Ariana Grande is a former Disney Star who has a very wide appeal with young kids and about 2M people have seen her recent tour.  There's almost no one in the World with high-school children or grandchildren who can't imagine their kids standing next to the terrorist when the bomb went off at the concert.

Yet the machines that move the markets are mindlessly oblivious to the danger and, as it is Tuesday, they are pushing the S&P back to 2,400, which is fine for us as we predicted this, waited for it and now we'll make money shorting the S&P Futures (/ES) for the 5th week in a row:

The fact that the S&P STILL can't get over 2,400 DESPITE the weaker Dollar and the stronger Apple does not give me the warm fuzzies about the strength of this weekly rally so, once again – we are going to be shorting the indexes at the levels we keep shorting them at and once again, later in the week, I will tell you how much money we made and you will say: "why can't I ever catch trades like that."  It's a vicious cycle…

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Monday Market Movement – Recovering on Low Volume

Same old, same old.  

If it's Monday, we must be recovering back towards Toppy Tuesday's highs so we will wait patiently to begin shorting again.  With Trump out of the country, we haven't had a crisis all weekend and they are keeping the President too busy to tweet – so all is well(ish) at the moment.  Unfortunately, no one is keeping the Fed from speaking and we have 6, yes SIX Fed speeches TODAY and then 2 tomorrow, 2 on Wednesday (and the Fed minutes at 2pm) 3 on Thursday and one on Friday for 14 Fed speeches in 5 days – a new record!

Endless Fed meddling is likely to give us a wild week leading up to Friday's Q1 GDP Report, which will be the 2nd estimate but the Atlanta Fed has already pegged Q2 GDP growth at a blistering 4.1% (almost double the first Q1 estimate of 2.3%) and, if true, the Fed has no choice but to tighten at the next meeting before we whip into an inflation crisis.  

We're already seeing tightening labor hammer productivity while driving up wages and we could be looking at 3-4% inflation rates by the end of 2017, which means you need to deduct that from your market gains to determine your buying power and, more importantly, deducting even 3% from bond gains pushes most of them into negative territory – a factor that could stampede even more money into the markets in search of inflation-fighting returns.  

That's going to blow us off the scale re. valuation metrics on the S&P 500, which is already showing overvalued levels on 18 of 20 of the metrics tracked by Bank of America (BAC) with the Shiller P/E Ratio a whopping 74% above average and the Market Cap of the S&P is almost double its usual percentage of our GDP:

As noted in last week's Live Trading Webinar (replay available here), we have no shortage of long positions and we took advantage of the dip to add a few to our Member Portfolios last week but, on the whole, we're still aiming to keep a mainly neutral stance, waiting for the market to decide if it wants to break up…
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Fleeing Friday – Trump Escapes to Europe

Image result for trump europe cartoonWill Trump come back?  

Julian Assange is finally coming back after 8 years in hiding, I wonder where Trump will be seeking asylum – perhaps Mother Russia?  As noted by CNN: "Besieged at home, Trump sets off for 'do-or-die' foreign trip," stating "if President Donald Trump's crucial first foreign trip passes off without a disaster, it will be considered a success."  8 days without a disaster?  It's only been 114 days so far and I don't think we've gone 3 in a row without a new scandal!  

Not only that but Julian Assange is back – I can't wait to see WikiLeaks turn its sights on Donald's secrets.  Over in Europe, they want to know if Trump is really pulling out of the Paris Climate Accord in defiance of the entire rest of the World, who ratified the treaty – there's a good start.  That's the middle of his trip, which Trump ends with a NATO meeting, where he has to explain to the actual Members why he thinks they don't do their share but first, Trump heads over to the Middle East, where he has boasted he can fix things.  

Of course the real purpose of the trip is to sell arms to the Saudis and we have our LMT and RTN back from when Trump was first elected (see: "Merry Trumpmas – Looking Forward to a Wild New Year").  Raytheon (RTN) is already over our $145 target and our trade idea for them was:

We also like Raytheon (RTN), who get paid almost $2M every time the US fires a Tomahawk missile (and we do that a lot!).   So, to bet on the escalating cold war (and the proxy wars we love to fight), we like:

  • Sell 5 RTN 2019 $120 puts for $8.50 ($4,200) 

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Throwback Thursday – Russians, Russians Everywhere and a President Who Doesn’t Think

Image result for communist witch huntLet the witch hunt begin!  

Direct from Central Casting we now have former FBI Director, Robert Mueller III playing the role of Special Counsel to investigate what the President alleges are non-existent ties between Russia and Team Trump as well as to determine the extent to which Russia worked to undermine the US elections.  

A lot of people are saying if we end up impeaching Trump then Pence will become President but if we're impeaching Trump because the Russians helped him steal the election – why would we then put his running-mate in charge?  I guess we'll cross that bridge when we come to it but clearly Mike Pence couldn't get elected dog catcher in 80% of this country.  Even now, when I went to the Wikipedia page to check on some Pence facts, I am reminded of the fact that the people had already spoken and they did not vote in favor of him or Trump:

America is one of the only remaining countries on the planet that doesn't elect their leaders using the popular vote and look what a mess we have already – just 112 days into Trump/Pence.  Clearly the markets were not pleased with the speed at which this Administration is coming apart at the seams and, of course, as toppy as they were – they were ripe for a nice fall anyway.  

A fall is certainly what we got yesterday, with both the Nasdaq (QQQ) and Russell (IWM) falling over 2.5% on the day.  According to our 5% Rule™, it it more likely we follow through for another 2.5% drop today and tomorrow than recover and that suits us just fine as we're bearish anyway (and congrats to all who used our bearish index hedges or SVXY hedge from Tuesday morning's PSW Report, which you would never miss by subscribing here).  

For the morning, we're looking to see if we get a weak bounce off yesterday's drop and, in the Futures, the Nasdaq (/NQ) fell from 5,700 to 5,550 which is 150 points so the bounce should be 20% of the drop or 30 points, back to 5,580 for a weak bounce
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Risky Wednesday – White House Turmoil Worries Markets

"Don't compare it to Watergate!"  

That is the GOP talking point du jour as an Army of Trump apologists storm the media to counter claims that President Trump asked the F.B.I. director, James B. Comey, to shut down the federal investigation into Trump’s former national security adviser, Michael T. Flynn, in an Oval Office meeting in February, according to a memo Mr. Comey wrote shortly after the meeting.  

The documentation of Mr. Trump’s request is the clearest evidence that the president has tried to directly influence the Justice Department and F.B.I. investigation into links between Mr. Trump’s associates and Russia. Late Tuesday, Representative Jason Chaffetz, the Republican chairman of the House Oversight Committee, demanded that the F.B.I. turn over all “memoranda, notes, summaries and recordings” of discussions between Mr. Trump and Mr. Comey.  Such documents, Mr. Chaffetz wrote, would “raise questions as to whether the president attempted to influence or impede” the F.B.I.

So you see, it's nothing like Watergate, where Nixon was attempting to "stonewall" the investigation – not impede.  Totally different this time…

The Watergate incident, like Russia meddling in the US election, took place during the time before the President took office and, like Watergate, Trumpgate is unfolding in May and will likely come to a head in the Summer.  In Nixon's case, the break-in happened in June of 1972, Nixon won by a landslide in November of 1972 and a year later, a defiant Nixon said "I am not a crook" and it wasn't until August 8th, 1974 when Nixon finally gave up, two weeks after Congress began impeachment proceedings.  

We're still waiting for this generation's "Deep Throat" to step forward and please, be careful if you Google that phrase!

Image result for nixon watergate doonesbury

Market-wise, the S&P was at 142 when Nixon was sworn in in January of 1973 and fell 39% to 86 by the time he resigned in August of 1974 as people's faith in the US economy deteriorated along with their faith in it's President.  We've all enjoyed the benefits of the "Trump Rally" with the S&P up 317 points (15%) but, as I noted yesterday morning (and 4 Tuesdays…
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Toppy Tuesday – S&P 2,400 – Again

Here we are again:

It seems like every Tuesday I have to point out that Mondays are meaningless and, so far, we've made good money shorting the S&P Futures (/ES) at 2,400 as well as Dow (/YM) 21,000 and Russell (/TF) 1,400 but the Nasdaq (/NQ), now 5,708 keeps going up and up, which is no surprise with Apple (AAPL) at $156 – up 10% since April 25th and AAPL is 15% of the Nasdaq by itself.

That adds 1.5% to the Nasdaq and the rest of the Nasdaq's 3% move came from the Dollar falling from 100 on the 25th to 98.35 this morning (-1.65%) and that's the story of how we got here.  The fact that the S&P STILL can't get over 2,400 DESPITE the weaker Dollar and the stronger Apple does not give me the warm fuzzies about the strength of this weekly rally so, once again – we are going to be shorting the indexes at the levels we keep shorting them at and once again, later in the week, I will tell you how much money we made and you will say: "why can't I ever catch trades like that."  It's a vicious cycle…

Remember, I can only tell you what the market is going to do and how to make money trading it – that is the extent of my powers.

Yesterday morning, for example, in our PSW Report, we picked FEYE as a nice play since the news was all about cyber security and FEYE is a company we've had our eye on.  Despite the strong open (our Members get the report long before the market opens) on the stock, the 2019 $12 puts were barely affected and, as late as 2:10 pm, people were still filling the short puts at our $2 target price and they finished the day at $1.84, up 8% for a nice start (see yesterday's post for details on the trade idea).  

On Friday it was Cheniere Energy (LNG), based…
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Cyber Monday – Hack Attack Affects 200,000 Computers, Markets Oblivious

Nothing seems to matter. 

On Friday a ransomware attack hit 200,000 computers in 150 countries and the source seems to have been files that were stolen from our very own NSA by WikiLeaks.  Now, granted this attack only affects people who haven't updated Microsoft (MSFT) Windows since March and another patch came over the weekend – so the good news is that MSFT seems to be able to keep on top of these things but random cyber-attacks are yet another risk factor the market is now ignoring as we hover around those record highs.

As a trade idea off this madness, I like FEYE, who provide Corporate Cybersecurity Solutions and whose phones should be ringing off the hook this morning as it occurs to many more companies that maybe it is important to have someone make sure their computers aren't attacked by malware.  

FireEye (FEYE) is a pre-profit company but growing at about 20% and likely 2 more years away from turning a profit but, at $14.79, you can sell the 2019 $12 puts for $2.05 for a net $9.96 entry, an additional 32% discount to the already low price. It's a good way to get your feet wet and watch the stock and ordinary margin on the short puts is only $978 if you sell 10 so you collect $2,000 against $978 in margin and your return on margin is over 200% and all the stock has to do is stay above $12, giving you a $2.79 cushion (19%) on your full gain.

Another big story this morning is oil, which has popped over our 2.5% line at $49 and that has been good for our longs, which gained $8,200 for the day (you're welcome) and we're setting tight stops here as we're up over $5,000 overall making this a very successful trade from Wednesday's Live Trading Webinar.  

Oil is up on news that Russia is agreeing with OPEC to extend production cuts through the first quarter of 2018 and that should all be ratified at the meeting a week from Thursday.  Of course they are asking the US producers to voluntarily cut back and…
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Thank Trump It’s Friday – So Many Things Not To Worry About

Chinese bond yields are up 10% this month.

Since the election they are up from 3.25% to 5.5%, which is up 57% in 180 days.  Generally, that would be a cause for concern but nothing seems to concern this market, including the fact that tens of Billions of Dollars worth of bonds have lost 57% of their value in 6 months.  $560Bn has now been chopped off the Shanghai Stock Exchange in 2017 and the small-cap (non-Government) ChinNext Index is back at its 2015 crash lows.

The G7 Finance Ministers are meeting this weekend and Chinese President Xi Jinping is having his own summit including other World leaders like Putin (no need for Trump if his boss is there), where he is promoting his $500 billion trade-and-infrastructure plan, which is called the Belt and Road Initiative. The summit begins Sunday and will showcase Xi’s plans to remake global trade patterns in China’s favor while the US moves in the opposite direction and closes its borders and taxes trade.  China needs to do something to pull their economy out of a power-dive that's been accelerating since early April:

Meanwhile, Mexico, who is also meeting with China, has put the US Governent on notice that they have other places to export to if NAFTA gets torn up.  "We will use (the China visit) geopolitically as strategic leverage" declared Mexican Economy Minister Ildefonso Guajardo. "It sends the signal that we have many alternatives."

"If NAFTA disappears, I can export cars (to the United States) paying 2.5 percent tariffs. If they want to export yellow corn to me, I can raise tariffs to inaccessible levels," Guajardo said. "But to make that strategy credible, I have to broaden our agreements with Brazil and Argentina."

This is the way a President can destroy the economy, not just for a moment, but for decades to come.  The GOP is fond of pretending that, 25 years later, NAFTA is the reason jobs moved overseas but, if it turns out that, like pretty much everything, that they are lying about that and that all they will accomplish
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Failing Thursday – Democracy and the Bull Market Now on Life Support

Image result for trump fascist"A little whiff of fascism."

That was the quote of the day regarding yesterday's firing of FBI Director James Comey, who the White House now says "threw a stick of dynamite into the Department of Justice, and committed “atrocities” in his handling of the Clinton email saga."  That's just a week after saying Hitler wasn't such a bad guy after all but the Director of the FBI, now HE committed atrocities!  Wow!  Wow!  

Once upon a time, that statement alone would have been all people were talking about but now that's just another day in Washington, barely worth a mention.  Also not getting a mention are reports that Comey told associates that Trump was "outside the realm of normal,” even “crazy."  I guess we can file that under "so what else is new?" but investors are voting with their feet this morning and, as we predicted yesterday, the markets are turning down a bit.

Political turmoil is never attractive to investors and this is not something the President can tweet away (and read the comments under the tweet, they are hysterical).  There are currently 3 separate investigations going on and, while we are focused on the FBI investigation due to Comey's firing, the Senate is investigating this morning and, in fact, Comey was supposed to testify but his timely firing will prevent him from coming today and instead the temporary Director of the FBI will testify to things he did not directly know about.  Just a coincidence that Comey was fired right before he was scheduled to testify, I'm sure…

While Team Trump is hoping for a rubber-stamp from the Senate this morning, the Senate has to at least pretend they are conducting a real investigation or they face severe political backlash as the polls have already turned very much against them.  Republicans would rather sacrifice a President than sacrifice control of the House and Senate and those are the stakes going foward (aside from our Democracy, which has already been sacrificed, of course). 

Not many people have been paying attention to the Senate testimony so far but back in March, we already had a boatload of data from Marco Rubio, who
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Zero Hedge

Swedish Housing Bubble Pops As Stockholm Apartment Prices Crash Most Since June 2009

Courtesy of ZeroHedge. View original post here.

Even though Sweden’s property bubble is not the longest running (that accolade goes to Australia at 55 years), it is probably the world’s biggest with prices up roughly 6-fold since starting its meteoric rise in 1995.

Of course, as we noted last month when the SEB's housing price indicator, which measures the difference between those who believe prices will rise and those who expect t...

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Phil's Favorites

Fascism's return and Trump's war on youth


Fascism’s return and Trump’s war on youth

Courtesy of Henry GirouxMcMaster University

Donald Trump’s policies represent a particular attack on American youth and children, particularly those who are disadvantaged. (AP Photo/Pablo Martinez Monsivais)

Fascism is all too often relegated to the history books.

The word conjures up a period in which civilized societies treated democracy with contempt, engaged in acts of systemic violence, practised extermination and elimination, supported an “apocalyptic populism,” suppressed dissent, promoted a hyper-nationalism, displayed contempt for women, embraced militarism as an absolute ideal and in...

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Designer proteins that package genetic material could help deliver gene therapy

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


Designer proteins that package genetic material could help deliver gene therapy

Courtesy of Ian HaydonUniversity of Washington

Delivering genetic material is a key challenge in gene therapy. Invitation image created by Kstudio, CC BY

If you’ve ever bought a new iPhone, you’ve experienced good packaging.

The way the lid slowly separates from the box. The pull...

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Chart School

Rallies Slow As Semiconductor Selling Eases

Courtesy of Declan

Markets experienced early gains but gave them back by the close of business. Given the mini-rally of the past five days, some of the indices are looking vulnerable to a new round of selling.

The S&P finished with a narrow inverted hammer on low volume but at new highs. A move back to the newly accelerated channel is looking favored.

The Nasdaq also finished with a narrow doji but wasn't able to make new highs.  It's already close to one channel but looks more likely to reach down to th...

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Insider Scoop

Earnings Scheduled For December 13, 2017

Courtesy of Benzinga.

Companies Reporting Before The Bell
  • Lightinthebox Holding Co Ltd-ADR (NYSE: LITB) is estimated to report quarterly earnings at $0.01 per share on revenue of $78.49 million.
Companies Reporting After The Bell
  • ABM Industries, Inc. (NYSE: ABM) is expected to post quarterly earnings at $0.49 per share on revenue of $1.49 billion.
  • ... more from Insider

Digital Currencies

Not A Bubble?

Courtesy of ZeroHedge. View original post here.

Meet The Crypto Company - up almost 20,000% since inception in September...

To a market cap of over $12.6 billion...

Grant's Interest Rate Observer drew the world's attention to this 'company' yesterday.....

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Tax Bill May Spark Exodus From High-Tax States

Courtesy of via

The following is a summary of our recent podcast, “Exodus – The Major Wealth Migration,” which can be listened to on our site here on on iTunes here.

It’s looking increasingl...

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Members' Corner

An Interview with David Brin

Our guest David Brin is an astrophysicist, technology consultant, and best-selling author who speaks, writes, and advises on a range of topics including national defense, creativity, and space exploration. He is also a well-known and influential futurist (one of four “World's Best Futurists,” according to The Urban Developer), and it is his ideas on the future, specifically the future of civilization, that I hope to learn about here.   

Ilene: David, you base many of your predictions of the future on a theory of historica...

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Mapping The Market

Puts things in perspective

Courtesy of Jean-Luc

Puts things in perspective:

The circles don't look to be to scale much!


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Swing trading portfolio - week of September 11th, 2017

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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NewsWare: Watch Today's Webinar!


We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.


EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...

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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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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 >>