Phil's Newsletter

Tricky Tuesday – Markets Reverse Yesterday’s Reverse

Wheeee, what fun!  

Clearly investors do not have a clue what's going on as we are in what we like to call a "Bugs Bunny Market," where he throws a switch and everyone stampedes in and out of the theater (5:00 on this video).  That's what the Fed has been doing to investors but don't blame the Fed, blame the clueless investors who have no actual investing premise other than whatever they think the Fed will do.  Obviously, you can't have real price discovery when there are dozens of major stocks trading at hundreds of times earnings – the room for correction is always a huge overhang.

We're well-hedged and could really care less, though we would like to see a nice correction so we can finally go back to our Watch List and turn it into a Buy List again at reasonable prices.  I called yesterday a "watch and wait" day as we expected to see some bounces and, of course, they were more than we expected but, by 3pm, in our Live Member Chat Room, we had enough watching and I made this call:

I like /ES short at 2,150, Dow 18,250, Nas 4,750 and RUT 1,225 are our other marks with /NKD 16,700 and Dollar 95.06 needs to stay above 95, of course.  Oil closed at $46.20.

As you can see, at 2,137.50 we're already up a quick $650 per contract this morning (and we expect lower still).  Trading Futures is one of those fun things you can do with your sidelined CASH!!! when you are bored but we had to wait PATIENTLY for the right opportunity to go short again – almost all day yesterday, in fact.  Keep in mind though, that Futures trading is tricky and requires a lot of practice – we'll be doing a Live Trading Webinar tomorrow at 1pm, EST, and we'll discuss some of our Futures trading techniques but remember:

You've got to be crazy, you gotta have a real need
You gotta sleep on your toes,

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Monday Market Movement – Hedging for Disaster

Wheeeee – we love a good sell-off.

Especially when we're expecting it, right?  Last week, in our September Portfolio Review, we suggested a new hedge to prepare for the coming sell-off.  It was a more aggressive hedge than we usually take because our sense of doom was growing stronger and we didn't feel we had enough protection for our Long-Term Portfolio.  The hedging play was:

  • Buy 50 (more) TZA Jan $30 calls for $3.15 ($15,750) 
  • Sell 50 (more) TZA Jan $40 calls for $1.70 ($8,500) 
  • Sell 5 TSLA Jan $250 calls for $4.70 ($2,350) 
  • Sell 5 AMZN Jan $900 calls for $8 ($4,000) 

It says 50 more because we already have the spread.  The net cost of our addition was just $900 in cash plus the margin on the short calls and the position pays back, if the ultra-short Russell ETF (TZA) is over $40 in January, $50,000 back for a $49,100 profit.  

Of course, you don't have to wait until January to make some good money on hedges.  After just a single day's sell-off, already the Amazon (AMZN) Jan $900 short calls have fallen to $6.40 ($3,200) and the Tesla (TSAL) Jan $250 short calls are down to $2.60 ($1,300) while the TZA Jan $30 long calls have jumped to $3.85 ($19,250) and the TZA Jan $40 long calls are now $2.15 ($10,750) for a current net of $4,000, which is already up $3,100 (344% on cash) in just one week

Image result for the dealer always wins goldmanThat's how
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Faltering Friday – Our Tuesday Prediction Nails the Market Move

Told you so!  

Our first morning post of the short week was titled: "Testy Tuesday – 4,800 and Bust on Nasdaq in Wake of Lame G20" and we predicted both the move UP to 4,800 on the Nasdaq Futures (/NQ) and the failure to hold it – all in one headline!  

I won't get back into WHY it happened, I laid that out on Tuesday and you can go back and read that yourself.  Wednesday, the markets were up but I we stuck to our bearish guns as I warned in that day's headline: "Weak Dollar Wednesday – Markets Propped Up in Grand Illusion" and, once again, the headline says it all.  Yesterday morning, the markets were stubbornly high, so we led with: "Faltering Thursday – Still Shorting Those Futures" for what are now, obviously, great reasons.

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

This morning, aside from the macros we expected, we have the rate hike we expected in the form of the Fed's Rosengren saying: "Waiting too long to tighten policy could lead to conditions necessitating more rapid increases."  That's not what the bulls wanted to hear but you have to tell the kids there really, Really, REALLY is no Santa Clause and then give it some time to sink in as it's a huge betrayal of everything they believed (and everything you told them, you lying bastard) their whole lives – very traumatic.  

The pattern every time is for a "dream" of about 3% growth.Of course, if you want real trauma, call on Dr. Jeff Gundlach, who prounounced our economy dead, no revival as GDP forecasts are trending lower and lower despite 23% of the Global GDP's Central Banks now paying you to borrow money.  Gundlach has abruptly reversed from his call for the Fed to stop QE and now feels that emergency stimulus measure are in order to stave off a potential and imminent re-recession. 

Gundlach feels rates have reached their lower limits (negative will do that, I suppose) and we agree, of course and we're short on…
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Faltering Thursday – Still Shorting Those Futures

If at first we don't succeed…

We're still using yesterday's shorting lines but we moved the Russell (/TF) up to 1,261.50 this morning in our Live Member Chat Room, after we gave up on 1,255 in yesterday's Live Trading Webinar (replays on our YouTube channel) - getting out even before it began to run up in the afternoon.  Other than that, we're shorting the same levels, favoring the /TF short for the simple reason that the Russell is up and the others are not – so it has farther to fall!

As we expected and, as usual, Draghi and the ECB were all talk and no action this morning but we're still waiting for Draghi's press conference, where he will once again promise to take all necessary actions to prop up the markets, while actually taking no action at all.  

I think the Central Banksters have become a bit complacent over the summer as the Junior Banksters manning the machines at the trading houses have given them a low-volume rally but now the Big Banksters are coming home from vacation and all the puts are in place (bought cheaply with a low VIX) and it's time to take down the markets.

In a desperate attempt to prop up oil prices, the MSM is harping on the 12.1M barrel draw in inventories shown in the API report, which is the biggest draw-down since 1985 and represents about 10% of a week's worth of oil usage.  Can the US have had such a demand spike over the holiday weekend?  No, of course not – that would be silly.  

What actually happened and what none of these "expert" analysts or corrupt media talking heads will tell you is that the hurricane disrupted imports last week and we imported 1.7M barrels per day LESS oil.  1.7 x 7 = 11.9M barrels, which accounts for all but 200,000 barrels of the drawdown – which is actually a crap demand number for a holiday weekend

The EIA report (11 am) should confirm the draw in oil and, currently, oil (/CL) is at $46.20 and we can't wait for the beautiful sheeple to pile in and drive prices higher on…
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Weak Dollar Wednesday – Markets Propped Up in Grand Illusion


I wish I could get enthusiastic about the rally but the volume on the SPY yesterday was just 51.5M vs the already low 90M 3-month average, so not even 60% of a normal day AND the Dollar collapsed from 95.80 to 94.80 so that's down 1% in the thing our stocks are priced in which means the stocks have to gain 1% just to be even.  

I know a lot of people don't really get this concept so let's look at it very simply.  Let's say you have a cake recipe that has to be EXACT to work and it calls for 100 teaspoons of sugar and you measure it out and make your cake.  Simple, right?  Now, let's say you have some sort of metric teaspoon that you know for a fact is 1% smaller than a regular teaspoon – now how many teaspoons do you put in?  101, right?  

Well, if I have a stock that was $100 yesterday and today each of those Dollars has lost 1% of their value – then I want $101 for my stock, don't I?  That's because, ultimately, it's not the Dollar I want per se but the buying power of that Dollar – the things I can turn around and exchange it for.  If the Dollar loses value, then it will take more of them to make me happy.  

So, yesterday, when I said 4,800 would not hold on the Nasdaq, the Dollar was 1% higher so today, with the Dollar 1% lower, I need to see 4,848 because, frankly, the 0.625% move to 4,830, though impressive looking, was actually a 0.375% loss in a steady-money basis.  This is another HUGE flaw in TA, because it doesn't take into account currency fluctuation.  

Image result for little rascals cake baking animated gifThat's like you baking cakes and not worrying about whether you are using a teaspoon or a tablespoon to measure things with – you'll end up with something – but it won't be the cake you expected unless you LUCKILY happened to use the right spoons at the right time – giving you the very dangerous impression that your "system" works.  

So, with that in mind, we are still

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Testy Tuesday – 4,800 and Bust on Nasdaq in Wake of Lame G20

Image result for i will gladly pay you tuesday for a hamburger todayIs it Tuesday already?

While we were out enjoying our last weekend of summer, our Global leaders got together in China this weekend, met for 3 days and accomplished – NOTHING!  Well, not nothing – China and the US did ratify the Paris Climate accords and that's huge (more on that later) but it also wasn't actually G20 business, the G20 released their communique with 48 bullet-points that essentially reiterated their last meeting, after which nothing happened.

China's markets popped because, as Xinhau News put it: "The world has been hoping for Chinese wisdom and prescription to cope with common challenges after the country took over the G20 presidency."  "We will continue to reinforce macro-policy dialogue and coordination, work in the spirit of partnership to promote mutual help and win-win cooperation, and focus our minds and energy to pursue strong, sustainable, balanced and inclusive growth," Xi said.  

  • A mix of effective tools, including fiscal, monetary and structural ones, must be implemented to buffer against short-term risks and unleash medium- to long-term potential, Xi said.
  • "This will send a strong signal of G20's commitment to promoting global growth, and help shore up market confidence and ensure stability of global financial markets," Xi said.
  • "We are determined to break a new path for growth to inject new dynamism into the world economy," Xi said.
  • Past realities teach us that merely relying on fiscal and monetary policies does not work for the world economy, Xi said, adding that the world should pursue innovation-driven economy and create a new round of growth and prosperity.

Hey, hey – someone needs to tell this Xi guy that he's all worried about nothing.  Stock markets are trading at record highs, what could possibly be so bad?

What?  No, pay no attention to that chart!  Just because GDP growth (worldwide) is falling into the crapper DESPITE tens of Trillions of Dollars in stimulus by our mighty Central Banksters, the markets are trading at their all-time highs – especially in the US, where everything is AWESOME.  

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Philstockworld September Portfolio Review – Still Too Bullish?


That's up from our $600,000 start on our paired portfolios in just under 3 years (November anniversary) and, more importantly, up $52,975 (8.8%) since our July 4th review – not bad for 2 months where we were mostly playing defense!  

We were wrong (so far) to heavily hedge our Short-Term Portfolio, which lost $22,581 as our hedges tended to expire worthless but having those hedges in place allowed us not to touch our Long-Term Portfolio positions, which gained $73,902 almost without touching our bullish positions all summer.  That's right, if you had just read our review on July 4th and copied our Long-Term Portfolio positions, which only had a net market value of $123,955 at the time (we are 80% in cash), they are now net $186,397 (as of Friday's close) - up $62,442 (50%) against the cash requirement (and the LTP is currently using $339,750 in margin so the return on margin was 18% on margin in 2 months).

The reason some of the numbers are different is we did the individual reviews during the week and Friday's close was a little different but not very.  Also, it's very important to note that the LTP is, by nature, 100% bullish while it is the responsibility of the STP to carry our protective hedges so the STP is SUPPOSED to lose money when the LTP is making money – that is it's very sad fate.  Also, I will repeat our note from last time as it is still, obviously, very relevant:

To you day traders out there – I implore you  - please read the July, April and December reviews and look over those positions and check out those same positions 3 months later and CONSIDER – please consider – that day-trading may not be the best way to play the market.  Yes, the LTP goes up and down too but, when it's down, we have cash on the side to buy bigger positions (which is what we did last year) while they are cheap.  Since those positions are INVESTMENTS, we end up with something of great value when the market comes back.

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Non Farm Friday – Is America Working?

Whatever the jobs number, G20 lies ahead.

As you can see from the chart on the right, the macro data for August has taken a very sharp downturn so it seems unlikely that we'll be matching last month's level of 255,000 jobs created and, in fact, 180,000 is the whisper number and that would be nice, if the US population wasn't growing by 220,000 per month.  Adding anything less than 220,000 jobs is falling behind in total employment. 

That's why we don't care much about the headline number - which is estimated out of 165M jobs so 50,000 jobs up or down is a 0.03% tracking error which is why it's idiotic to see these figures taken so seriously every month.  No one in the MSM ever tells you these things because you tune in or click on the Non-Farm Payroll Report and hundreds of highly-paid pundits make a living discussing the NFP so none of them are going to turn around and tell you what complete and utter BS the number is, are they?  

So we're expecting a miss this morning, even from the lower expectations and we only need one chart (above) to make that prediction and I will be on TV Tuesday morning to discuss it and they won't let me decry the whole thing as a farce – not if I want to be invited back!  

Our working theory was to hold Gasoline Futures (/RB) longs overnight in expectations of a weak jobs report weakening the Dollar and popping /RB back over the $1.30 line after yesterday's 4.5% sell-off.  We're hoping for $1.32 or better as we're coming into the holiday weekend but anything over $1.30 is a keep – so tight stops over the line.

By the way, those USO Sept $11.50 puts we told you about finished the day at $1.49, up 186% for the week and we're done with those, obviously, as we flipped long into the weekend, as planned.  Rembmer, we can only tell you what the market is going to do and how to make money trading it – the rest is up to you!  

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Thursday’s Financial Flight – Welcome Dumb Money!

Are you the dumb money? 

Pretty much, by definition, you wouldn't know it if you were, would you?  The "smart" money, as we've noted all summer, has been flowing out of US equities but, according to the WSJ, it's gushing out of Europe at a pace that puts ours to shame.  Last week marked a record-breaking 29 consecutive weeks of outflows from European stock funds – 2 weeks more than the run that came ahead of the 2008 financial crisis.

This year's outflows ($86Bn) have reversed 2/3 of last year's inflows ($123Bn) with 1/3 of the year left or, in other words, ALL of the money is being withdrawn at the same pace it went in.  This makes perfect sense to us as we're about 2/3 cash too in our 4 Member Portfolios but, after all – we're the smart money!  

Despite ALL of the money being removed, like our own S&P holding up on no volume, the Euro Stoxx 600 is down just 3.4% and still a bit higher than it was at the start of 2015 – it's a magic trick who's fund-manager secret is to leave the index-leading stocks high (like AAPL in the US) while cashing in all the issues that won't move the needle much.  That keeps the dumb money flowing in – even while you are heading for the exits.

One big difference between Euro Stoxx and the S&P is the honesty of European companies in their guidance.  European companies have guided their earnings outlook down 30% for 2017 while S&P 500 CEOs are guiding up 17% – it's as if they do business on two different planets, not two different continents!  They don't lend to the same planet either with Euro Stoxx banks down 25% while US Banks are flat for the year.  

Even compared to the S&P 500's aggressive forward earnings guidance, market PRICES  are clearly out of control.  This FactSet chart, in fact, clearly illustrates why 1,850 is our Must Hold Line on our Big Chart – if prices were tracking earnings the way they usually do – that's where the S&P would be today but we're at 2,175 – 17.5% (325 points) above fair
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Window Dressing Wednesday – End of Month Market Prop Job

Flat enough for you? 

As you can see, yesterday's prediction to short the S&P at 2,180 is, so far, up $250 per contract, so you're welcome for that but it was up $500 per contract at 2,170 in the afternoon and shame on you if you didn't take that single-day money and run.  Remember, I can only tell you what the market is going to do and how to make money trading it – the rest is up to you!  

This morning, for example, we sent out an Alert to our Members at 6:50 (and a tweet to our followers) with short and long ideas to start the day off.  Our shorting lines on the indexes are the same as they were yesterday and we still have a chance to short my favorite index, so take a look if you're interested. 

It took 6 months but Shell (RDS.A) finally agrees with my Trade of the Year idea on Natural Gas (UNG) (/NG Futures), though a bit late as it's already up 40% since my call.  Shell expects LNG consumption to rise 5-7% per year and we should be right on track for our predictions through Jan, 2018.  

We announced our Trade of the Year idea on Feb 11th on Money Talk and, as above, I was subsequently interviewed about it in various places, including a Forbes interview, so it wasn't a secret and our trade was:

  • Sell 10 UNG 2018 $5 puts for $1 ($1,000) 
  • Buy 20 UNG 2018 $5 calls for $2.10 ($4,200) 
  • Sell 20 UNG 2018 $9 calls for $0.95 ($1,900)

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Zero Hedge

"The Only Way Out Is Creative Destruction" Sinn Fears "Self-Inflicted Malaise"

Courtesy of ZeroHedge. View original post here.

Authored by Hans-Werner Sinn, originally posted at Project Syndicate,

Almost exactly eight years ago, the Lehman Brothers collapse plunged the global economy into recession. The interbank market collapsed, and the entire industrialized world was thrown into the worst crisis since the end of World War II. Though central banks have maintained ultra-low interest rates, the crisis hasn’t yet been fully overcome. On...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Japan Shares Drop as More Than Half the Topix Trades Ex-Dividend (Bloomberg)

Japanese shares fell as more than half the companies on the benchmark Topix index traded without the right to the next dividend payment.

The Story of Post-Brexit Britain, In Charts (Bloomberg)

The surprise vote in favor of the U.K. leaving the European Union on June 23 unleashed shockwaves across the global economy, wiping trillions off the value of global assets. The referendum reshaped the British political landscape, and genera...

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Phil's Favorites

Is ISIS Targeting Spain Next?

Courtesy of Mish.

Since the beginning of 2016, ISIS propaganda repeatedly called on Spanish jihadists to take back Spain. It asked terrorists to “reconnoiter airline and train routes for attacks.” It urged followers to “poison food and water” with insecticides.

In July, ISIS started broadcasting videos with Spanish. The quality and syntax of the writing was exceptional, showing command of the language and of Spanish history.

The goal is to conquer Al-Andalus. That is the Arabic name for parts of Spain, Portugal and France occupied by Muslim conquerors (the Moors) from 711 to 1492.


Mainstream media has not reported on any of this. It wouldn’t be pol...

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Choosing Your Candidate: There's an App for That

By Knowledge Wharton. Originally published at ValueWalk.

Voter App

While most of people have already decided whom to vote for in the presidential election, there are still quite a few undecideds. A new app, called ‘Voter,’ promises to help bring more clarity about candidates based on their stances on issues and one’s own beliefs. The app developers say it also automates what could otherwise be a laborious process of determining candidates’ credentials and positions, and reduces human bias in the selection process.

Hunter Scarborough, the creator of the Voter app, says plans call for extending the app beyond the November presidential elections to candidates in races for Senate, House of Representatives and governors’ seats. Next, he plans to take it further to local elections such as for city councils, and may also go international. He discusses th...

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Kimble Charting Solutions

Silver facing "bunch" of resistance, sentiment lofty

Courtesy of Chris Kimble.

Below looks at a chart on Silver, dating back to the early 1970’s. Silver created an important top at $50 in 1980, did it create another important top at the same price in 2011?


Silver hit $50 in 2011, which was the highs back in 1980 and since then, has created a series of lower highs and lower lows.

Silver is now testing a bunch of resistance lines and its Fibonacci 61% retracement level at (1), wi...

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Chart School

RTT browsing latest..

Courtesy of Read the Ticker.

Please review a collection of WWW browsing results.

Date Found: Saturday, 26 March 2016, 02:36:15 PM

Click for popup. Clear your browser cache if image is not showing.
Comment: ZH: Its a BULLARD market, the FED jaw boning is keeping the market up!

Date Found: Sunday, 27 March 2016, 02:31:30 PM

Click for popup. Clear your browser cache if image is not showing.
Comment: RTT: World trade near 2008/09 lows. SP500 near all time highs. PLACE YOUR BETS! Roll up! Roll up!

Date Found: Tuesday, 29 March 2016, 02:42:11 PM

Click for popup. Clear your browser cach...

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Swing trading portfolio - week of September 26th, 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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Members' Corner

Market Liquidity and Macroeconomic Bullshit


Market Liquidity and Macroeconomic Bullshit

Courtesy of The Nattering Naybob

STJL - "Apparently macroeconomics is all bullshit – ROFL! Paging Naybob now… Famous Economist Paul Romer Says Macroeconomics Is All Bullshit."

The Nattering One muses... Macroeconomics as practiced by academics and those in charge is pure voodoo. Better to chant over goat blood, bird feathers and scattered entrails...

As for reality, overnight CNH HIBOR (...

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Mapping The Market

Here's a Cautionary Tale of Pension Privatization From Chile

Via Jean-Luc:

"When you let the free market take over, the little people get screwed and bankers get rich. Chile tried privatizing retirement plans and surprise, surprise, fund manager ate the profits… Pretty sure the results would be the same here..."  ~ Jean-Luc

Here's a Cautionary Tale of Pension Privatization From Chile

By KEVIN DRUM, Mother Jones

Among free-market fans, Chile's privatized pension plan has long been held up as a model for us to follow. The problem, as the Financial Times notes today, is ...

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Digital Currencies

Gold, Silver and Blockchain - Fintech Solutions To Negative Rates, Bail-ins, Currency Debasement and Cashless

Courtesy of ZeroHedge. View original post here.

By Jan Skoyles

I was so pleased yesterday by the announcement that I have joined the Research team at GoldCore as it meant that I could finally start talking about it and was back in a role that lets me indulge in my passion by researching and geeking out on all things gold, silver and money.


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Epizyme - A Waiting Game

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

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...

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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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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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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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