Phil's Newsletter

Testy Tuesday – 2,180 and Bust?

Big push or last gasp?  

2,200 is the top of our likely range at the moment and it's just 20 points away on the S&P and that's 400 points higher (22%) than we were in February and, according to our 5% Rule™, a 20% move up with a 2% overshoot is very likely to lead to a 4% pullback to about 2,120 before we'll see anything higher.

The volume gets lower and lower while the market climbs higher and higher and that's exactly the sort of thing Willie Wonka says just before something horrible happens.  I'm just saying…

We're having lots of fun scalping profits intra-day but we still have a generally bearish stance.  This morning, in our Live Member Chat Room, we already had a nice $250 per contract winner on the oil dip from $43.25 to $43 and now (8:15) we're back at $43.25 and, you know what?  We can do it again!  That's the nice thing about fake market moves – you can bet against them over and over.  

I was over at the Nasdaq yesterday discussing my broad market outlook on FaceBook Live, so you can watch that and save us the trouble of going over it again.  Needless to say we're still using yesterday's shorting lines on the Futures as, much like oil – they made great money yesterday and they can make great money again today as the market bucks like a bronco, trying to toss off the bears before it gets too tired to fight the gravity.

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!  

We did pick up a long this morning in the Futures and that's an old favorite as well.  It's good not to have all your bets in the same direction but our conviction trade is the oil (/CL) short – that's a melt-down waiting to happen (also outlined in yesterday's post).  Gasoline (/RB) is already well off the highs of $1.39, back to $1.36 and that would put oil back at
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Monday Market Madness – New Highs Amid More Turmoil

What will it take to stop this market?

Like Rasputin, the market has been Poisoned (by bad earnings), Shot (by Brexit), Stabbed (by negative economic reports including 50% reductions in GDP forecasts) and is clearly Drowning in debt – yet it will not die!!!  What is up with that?  Not even the threat of Donald Trump becoming President of the United States is enough to spook the bulls – so far.

This morning the Asian markets were flying, led by Japan gaining 2.5% off the strong US jobs report that led to a strong Dollar and a weak Yen, which makes all the Japanese exporters happy, for as long as that lasts, anyway.  Also lifting the markets are fresh rumors of an OPEC production cut, which had oil (/CL) hitting $42.50 along with $45 on Brent (/BZ) this morning and had us getting back on the Futures shorts in our Live Member Chat Room earlier

We're also shorting the Futures at Dow (/YM) 18,500, S&P (/ES) 2,180, Nasdaq (/NQ) 4,800, Russell (/TF) 1,230 and Nikkei (/NKD) 16,700 but only if 3 of 5 cross under in which case we short the next one to cross and that's then confirmed by the 5th cross under and then we stop out if ANY of them cross back over – very simple and it stops you from losing much money while letting a winner run wild.

If you are bullish you can play it the other way but I'm not and neither are:

  • Stan Druckenmiller (May 4th at the Ira Sohn Conference): “Get out of the stock market.”

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Options Opportunity Anniversary Review – Up 81% in Year One!

Well we're off to a great start.  

I did an extensive review of the OOP during our Live Trading Webinar on Wednesday (@ 38:35) where we looked over our current positions and determined we were well on track to gain another $60,000 (60%) next year but, of course, we won't be just sitting on our laurels – there will be lots of fun trades to make over the next 12 months.  

After our first year (we initiated the portfolio on Aug 8th, 2015) we are now the Top Performing Premium Portfolio over at Seeking Alpha and, in fact, our strategy is outperforming even America's best performing hedge fund (Gerbina Gold Group) by a wide margin.  In fact the 2nd best performing hedge fund is also a gold fund (AIS) and is only up 33.7% for the year – so our diverse portfolio, using our "Be the House – NOT the Gambler" philosophy is proving itself in this market.  

You can read more about that strategy in my January Forbes interview where, on page 4 of the interview, I gave an example trade from the OOP using a bullish spread on oil which was:

Buy 10 UCO July $5 calls for $3.70 ($3,750)

Sell 10 UCO July $10 calls for $1.55 ($1,550)

Sell 10 USO July $8.50 puts for $1.10 ($1,100)

Despite pulling back off the highs, UCO finished on expiration day (July 15th) at $10.91 so the trade expired in the money and returned $5,000 against the net $1,050 initial outlay.  That
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Non-Farm Friday – Is America Working?

It's jobs day!  

On April 8th, we added 144,000 jobs and the S&P went from 2,045 to 2,060 to 2,040 and settled at 2,047.  On May 6th we added only 11,000 jobs and the S&P went from 2,047 to 2,057 to 2,039 and settled at 2,057.  On June 3rd we added 287,000 jobs and the S&P went from 2,104 (was the high) and fell to 2,085 and settled at 2,100.  

So, there's really not much of a pattern other than we're likely to finish where we started and we're starting the day at 2,163 and we've been in a very tight range and we can expect Non-Farm Payrolls to revert to the mean and come in around 160,000 jobs at 8:30.  What's more important is whether we make a little progress in the 4.9% Unemployment Rate – that has stopped going down lately.  

From a market standpoint, we'd like to see hourly earnings continue to rise because, if we're going to move towards any kind of sustainable recovery, we have to begin to put more money in the pockets of our bottom 90% consumers.  

Now the S&P is at 2,164 and that's up 6% since April and I don't see what job outcome would drive it higher than it is now.  Either way, we're going to be hedging a bit bearish into the weekend as the Olympics open tonight in Brazil, which is a country that's in political and economic turmoil and right next to Venezuela, which is a country on the verge of collapse. 

With 60,000 hours of TV coverage scheduled for the Olympics, I imagine the political and economic situation will get some air time and most people in the US are not aware of what sort of disaster is going on south of Trump's wall.

8:30 Update:  Wow, 255,000 jobs were created in July – a total blow-out, way beyond expectations.  Unemployment stayed at 4.9% indicating more and more people are coming back to the labor force, which is good and hourly earnings went up another 0.3% – also good.  The initial market reaction was a quick pop in the indexes, but only 0.25%, tempered by a stronger Dollar,…
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Free Money Thursday – BOE Buys the Bulls Another Day for $79Bn

"Whatever it takes."

That's what Goldman Stooge (yes, it's an official position, so we capitalize) Mark Carney says he is willing to do to get investors to ignore the fact that the Bank of England had to severely reduce their outlook for 2017 GDP, from 2.3% to 0.8% while, at the same time stating that: "recent surveys of business activity, confidence and optimism suggest that the United (for now) Kingdom is likely to see little growth in GDP in the second half of this year."  

Today's move drops the UK's benchmark rate to 0.25%, half of what it's been for the last 7 years and Carney left the door open for even more easing – though not too much, apparently:

“I’m not a fan of negative interest rates,” says Carney. “We have other options to provide more stimulus if needed.”

“We see the effective lower bound as a positive number, close to zero, but a positive number.”

A positive number – but clearly not a positive whole number – that ship has sailed long ago!  The FSTE jumped 1.5% on news that their economy will be right on the edge of recession next year but, of course, that's because the BOE is now pumping $50Bn PER MONTH into the $2.6Tn economy, which would be like our Fed tossing $380Bn/month onto the fire.  That is a staggering amount of QE funneled through the banks by Goldman Sach's former Executive Director – just a coincidence, I'm sure.  

Speaking of Goldman Sachs getting caught using their connections to manipulate the market – the firm was ordered to pay $36.3M to settle a case after they hired a Fed employee and used confidential information he provided to bring in clients to access their access.  This went on for 2 years and involved Billions of Dollars worth of transactions and, in response to the $36M penalty, a GS spokesman said "Ow, my wrist!"  

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Will We Hold It Wednesday – Nikkei 16,000 Edition

"There's nothing to hold on to when gravity betrays you

When after all the urges some kind of truth emerges

We felt the deadly surges

Discovering Japan" – Graham Parker

Despite the best efforts of the BOJ, Japanese 10-year note rates are rising at an alarming, er, rate.

A four-day rout pushed 10-year yields to within three basis points of turning positive on Tuesday for the first time since March, after Bank of Japan policy makers disappointed investors last week by leaving bond buying and their negative deposit rate unchanged even as they increased exchange-traded-fund purchases. Pacific Investment Management Co. and former Ministry of Finance official Eisuke Sakakibara both say central bank Governor Haruhiko Kuroda is running out of room to expand stimulus.

“The selling is insane,” Satoshi Shimamura, head of rates and markets for the investment strategy department of MassMutual Life Insurance in Tokyo, said Tuesday. “The market is picturing an end to Kuroda easing. There’s no telling how far this will go.”

How fast can Japan fall apart?  Well, let's look at another BS currency that got overinflated as money flowed into risky assets searching yield:  Bitcoin plunged 30% since June and 20% of that is this week as $65M "worth" of BitCoins (119,756) were "stolen" from Hong Kong's Bitfinex, who have now halted all trading, deposits and withdrawals.  

It will be fun to see how this one plays out, hopefully not another Mt Gox incident.  That one involved 850,000 Bitcoins "valued" at $450M back in Feb of 2014 – Mt. Gox ended up liquidating in April 2014 and, since then, Bitfinex has become the World's largest exchange – supposedly with better security.  

Where oh where can we safely put our money these days?  Even the banks are looking dubious – perhaps we should invest in safe companies and then invest in someone who makes burglary tools for good measure!  Speaking of banks, yesterday FAZ trade got off to a great start and our WFC hedge held $47 for the day, so a good-looking trade all around.  

Meanwhile, today we're going to be watching
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Testy Tuesday – Euro Stoxx 3,000 or Bust!

Here's a nice way to boost the market:

Kick out the under-performing components!  The Dow engages in this kind of manipulation all the time, most recently swapping Apple (AAPL) in for AT&T (T), who had a nice 100-year run before the American Telephone and Telegraph Company was replaced by a company that makes phones in China.  Come to think of it – that's a very good summary of how the last 100 years has been going for America, isn't it?  

Well, if the components that get kicked out are any indication of where countries are declining, we should be a bit concerned that Euro Stoxx kicked out Deutsche Bank (DB) and Credit Suisse (CS) this morning, replacing them with ASML (semi-conductors) and SGEF (Construction) in order to prop up Europe's version of the Dow as it begins to falter at the 3,000 line.

Rupert Murdoch (Wall Street Journal) owns the Dow and Deutsche Bourse (DBOEY) owns the Stoxx Index and both can do whatever they want when it comes to manipulating the numbers that global investors use to make trading decisions.  Trillions of Dollars invested in ETFs that follow the indexes controlled by these two Top 1%'ers.  Whether that makes you comfortable or uncomfortable is probably a good indicator of your political viewpoints…

As you can see from our first chart, these shenanigans didn't even buy them the entire morning before the index plunged right back down from the small lift they got overnight in the futures (though the actual substitution takes place on Monday – so watch out for that!).  Europe is down about 1.5% overall this morning, led lower by Italy and Spain, who have their own bank crises to deal with.  

As you can see from yesterday's NYSE volume chart, despite the "flat" day on the S&P, what was really happening was that the headline stocks that move the indexes were propped up to mask MASSIVE selling in the broader market.  

As I noted in last week's Live Trading Webinar, it's very easy to game the markets on low-volume days because the Banksters and Fund Managers know FOR A FACT that Billions of Dollars from people's paychecks (401K, IRA) will flow into the…
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Just Another Manic Monday

Image result for Sell the house, sell the car, sell the kids wool"SELL EVERYTHING!"  

That's what Jeff Gundlach of DoubleLine Capital is telling people this morning as he said many asset classes look frothy and his firm is hanging onto gold to hedge their cash, saying:

"The artist Christopher Wool has a word painting, 'Sell the house, sell the car, sell the kids.'  That's exactly how I feel sell everything. Nothing here looks good, Gundlach said in a telephone interview. "  The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong."

Well, halfway through summer vacation, he had me at "sell the kids!"  Gundlach is not alone, however.  Now Goldman Sach's (GS) Christian Mueller-Glissmann has gone outright bearish, with a "tactical downgrade to equities for the next 3 months."  Here is the reasoning behind Goldman's creeping sense of gloom: 

  • The rally in risky assets over the past few weeks has continued n and broadened – the S&P 500 has made all-time highs, the VIX has fallen, bonds and ‘safe havens’ started to sell off, and cyclicals have outperformed defensives.
  • We think a key driver of the recovery has been a combination of the light positioning into Brexit and the search for yield amid expectations of easing.
  • However, given equities remain expensive and earnings growth is poor, in our view equities are now just at the upper end of their ‘fat and flat’ range.

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Friday Fizzle – BOJ and GDP Disappoint Investors, Again

M-m-m-m-my Kuroda!  

As you can see from the Nikkei chart – it's been a wild morning already as the BOJ ended up doing nothing, sending the Nikkei down 600 (3.6%), then back up 600, then down another 600 then back up 300, down 300 up 500 and now settling down 120 overall – what a mess!  Imagine what would happen if they ever tightened (don't worry, not going to happen). 

Still, lack of loosening is tightening as far as Japanese traders are concerned and the Yen blasted 2.5% higher, which is about as much as a currency ever moves in a single day and we're back to just 103 Yen to the Dollar, well below the 110 the BOJ and the Keiretsu demand to keep the exports flowing.  

The BOJ left the door open for more easing at the September meeting by saying there would be a "comprehensive assessment" on the effects of easing but I think the Western Press is misinterpreting it as the Japanese don't like to say no and this, to me, sounds like a no, which is not surprising given the INSANE amount of easing they've already committed (yes, like a crime) in the past 2.5 years of Abenomics.

Sure it's only Yen but 400Tn of them begin to be real money – close to $4Tn, which is about the balance sheet of our own Federal reserve except that our GDP is $20Tn and Japan's GDP is now less than $5Tn and falling fast.  Nonetheless, no matter how low rates go in Japan (-0.1% now) – they have been unable to dissuade people from buying JGBs – after all, getting 99% of your money back after 10 years keeps you well ahead of their 0.4% annual deflation, right?

This is not the CPI chart of a healthy economy folks and Japan is $12.5Tn in debt which is, if you care to count 1,287,000,000,000,000 Yen – that's 1.287 QUADRILLION Yen in debt – not even Zimbabwe had enough fake money to cover that sort of deficit and Japan is adding another 10% of the GDP ($500Bn) to the debt pile every year.  This is why the BOJ seriously
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Thursday Failure – Fed Does not Inspire the Bulls with Inaction


That's what we got from our Fed yesterday in a statement that held no new action and not indication of when there would be action and nothing is no longer good enough to sustain record high market levels – especially with the very mediocre earnings that are being delivered in the broad markets

As you can see from the Fear and Greed Index, the greed is still fairly extreme and the complacency is extreme too with the VIX down under 15 this morning and Treasuries (TLT), which we're short on, are still up at the $140 line post-Fed – as if they still might turn around and loosen further than they already have.  

Arguing for the loose camp, the Atlanta Fed released their GDP Now Forecast for the end of July and Q2 has been downgraded 40% from 3% to now 1.8% over the course of the month so now we understand why the Fed didn't raise rates yesterday – the economy is much worse off than people have been supposing! 

Evolution of Atlanta Fed GDPNow real GDP forecast

Since the BS upgrades began (which we said were BS all the way up) in May, the Dow has gained 1,000 points, from 17,500 to 18,500 and the S&P is up from 2,050 to 2,165 and those are both ridiculous in a flat economy and it was these RIDICULOUS upgrades to GDP outlook that acted as the catalyst to turn us around in the first place!  Here's my commentary on the subject from May 27th (GDP Friday – Yellen Spins Us Into the Holiday Weekend):  

…now we have the Atlanta Fed providing supporting data as they have raised their GDP Now forecast by 100% this month.  

Forget the fact that the core Durable Goods were terrible or that Auto Sales are falling off or that Consumer Comfort is

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Zero Hedge

Chicago Violent Crime Spreading To The "Safe" North Side Neighborhoods

Courtesy of ZeroHedge. View original post here.

Chicago's violent crime problem seems to be spreading to the historically safe "north side" neighborhoods.  The spike in crime on the north side comes as Chicago's police department has diverted more officers to the city's violent south and west side neighborhoods to fight extreme levels of violence there.  As reported by local Chicago news station WGN, violent crime is up 61% in the Loop this year with Near North Side up 50%, Lincoln Park up 42% and Edgewater up 44%.

WGN also reports that o...

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Old School Curated Links And News Aug 22 Edition

By Jae Jun. Originally published at ValueWalk.

Old School Curated Links And News Aug 22 Edition by Jae Jun

Welcome to the Aug 22nd edition of the Old School Curated Links and News.

I provide the latest round of valuable content that I’ve been reading/following as well as short updates to Old School Value you may be interested in.

With many people on vacation during August, Friday isn’t the best time to send out a list of links.

So I’ve moved it temporarily to a Monday for the next month or so.

Old School  Value: VIP Email List – How to Get Added

In the meantime, I’m preparing to send out extra hidden content to VIP people via email.

I’ve had a lot of people request to be added to the VIP list or ask how they can be included.


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Phil's Favorites

Now Children, Please Play Nice

Courtesy of Mish.

German Chancellor Angela is telling Turks in Germany to develop a high level of loyalty. The admonishment sounds like a kindergarten teacher preaching to her kids to play nice.

In related news, Jean-Claude Juncker repeated Merkel’s ill-fated message from a year ago, welcoming all refugees. He is seriously out of touch with voter reality given events of the past year.

Please consider Merkel Tells Turks in Germany to ‘Develop a High Level of Loyalty’.

Chancellor Angela Merkel has warned Germany’s Turkish population to “develop a high level of loyalty” to their new homeland, in the latest sign of political concern about divided allegiances in th...

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Chart School

S&P 500 Snapshot: A Modest Gain on Weak Investor Participation

Courtesy of Doug Short's Advisor Perspectives.

The S&P 500 rallied at the open and hit its 0.49% intraday high about 30 minutes into the session. It then slowly sold off to a narrow trading range after the lunch hour and then sold off to its 0.20% closing gain in the close vicinity of its intraday low. The mixed spurt of economic news at 10 AM, strong New Home Sales and weak Richmond Fed Manufacturing didn't seem to be much of a factor in today's trade. The general view among the pundits is that the market mavens (who aren't on vacation) are awaiting the Friday flavor of Fed Chair Yellen's spee...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Olympics a Losing Streak for Host Currency as Real Falls: Chart (Bloomberg)

Brazil’s real, the best-performing currency this year with a 24 percent gain, lost its shine during the Olympics in Rio de Janeiro.

This country went from boom to economic nightmare in 5 years (CNN Money)

In 2011, Mongolia's economy grew by 17% and attracted billions of dollars in foreign investment. Now, the country is facing a debt crisis and possible default.


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Kimble Charting Solutions

Testing- Crude Oil and Natural Gas testing breakout levels

Courtesy of Chris Kimble.

Crude and Natural Gas have stunk it up for the past few years, been a great place to avoid. Could both be creating multi-year trend reversal patterns? CLICK ON CHART TO ENLARGE Crude and Natty are both correlating the past few years and both are near tests of resistance that could send a message that […]Requires Premium Membership - log in or see subscription options

To become a member of Kimble Charting Solutions, click here.


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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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Swing trading portfolio - week of August 22nd, 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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Digital Currencies

Man Who Introduced Millions to Bitcoin Says Blockchain Is a Bust


Man Who Introduced Millions to Bitcoin Says Blockchain Is a Bust 

By  at Bloomberg


Stefan Thomas, who introduced millions of people to bitcoin, has had a change of heart.

Blockchain, the ledger software that makes the digital currency possible...

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Mapping The Market

Illusion of Choice

From Jean-Luc:

Looks like we are down to about 10 companies for our consumer goods:

Just like banks, airlines and cable companies! 

The Illusion of Choice in Consumer Brands

Explore the full-size version of the above graphic in all its glory.

If today’s infographic looks familiar, that’s because it originates from a well-circulated report that Oxfam International puts together to show consolidation i...

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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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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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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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