Phil's Newsletter

Monday Mourning – The Mandarin Meltdown Continues

China continues to fall apart.

Despite 4 rate cuts since November and much looser restrictions on bank lending and a very aggressive stimulus package, this weekend the PBOC admitted what we already know – that China's economy is still slowing and there will be no quick turnaround.  Even worse, they aknowledged that the 2Tn Yuan ($322Bn) that they set aside for local Government bond swaps would be inadequate to cover the problems in that sector – indicating the extent of local Government defaults is far greater than China has previously admitted (something we warned you about in June).  

PBOC Director Sheng Songcheng says he expected second-quarter net profit growth for banks to fall, adding that banks' exposure to risk "has become clearer" but he said the real-estate market could rebound in the second half and provide support for the economy.  Other analysts say that view is unduly optimistic, pointing to huge inventories of unsold homes and high local government debt which is curbing their ability to spend on infrastructure projects.

That means we'll have to keep a close eye on China's property market to see if it really is stabilizing.  This weekend we got another poor reading (47.8) on China's PMI, down from 48.2 last month and again, I cannot stress enough that this is despite MASSIVE stimulus.  There have also been a lot of major property sales in China as the Top 1% have been dumping their holdings on speculators betting on a turnaround – not really a good sign or, as Zero Hedge puts it:

To sum up: misrepresentations about local government debt, lies about bad debt levels, and now, the wealthiest locals are quietly, slowly getting out of Dodge, er, China. We can only hope that China's desperate attempt to hold up its stock market, the final frontier before all confidence in China crumbles alongside, lasts a few months longer, or the great Chinese hard landing that has been discussed for years, and always delayed in the last moment, is now virtually inevitable.

Looking at the PMI numbers, the hard landing
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Philstockworld Top Trade Review – August

What a crazy summer it's been already!

Our Top Trade Alerts have been such a popular new product that we're already rolling out a spin-off that will focus on shorter-term trades.  And no wonder, as 27 of our first 35 trade ideas (77%) have been winners so far and 4 of our 9 losers have been Lumber Liquidators (LL) – and I still think they'll turn around… really I do.  

Of course the misses (and the wins) are arbitrary as I generally do a review at the beginning of the month for trades that are about 2 months old (today we're looking at June's Top Trades) – it's very much up to you to take those winners off the table and cut the losers, we don't micro-manage Top Trades but our Premium Membership does offer a daily chat room where we discuss trade ideas every day Top Trade Members are allowed to upgrade (it's closed to new subscribers at the moment).  

On of our 3 losers last month was a TWC spread (5 2017 $155/175 bull call spreads with short $155 puts at net $3,500), which was down $500 at the time but it's now back to $3,500 and well on track for our full $6,500 potential gain (+185% on cash) with TWC at $190.  That trade is in our Long-Term Portfolio, where we know better than to fret over short-term fluctuation and simply concentrate on whether our trade ideas are on or off track for their targets. 

As our PSW Members know, many times those "disappointing trades" make for the best entry as, like TWC, they are simply getting off to a slow start.  However, sometimes trades start off really well but then turn sour.  That's why it's important to have a trading plan for each position.  In the case of TWC, we expect to get $20 back on our $7 spread in 18 months so we EXPECT to be gaining $13/18 = 0.72 x 500 (5 contracts) = $360 per month.  

The $25,000 Portfolio – Halfway to $100K!Understanding how much a trade is SUPPOSED to make each month lets us know if it's
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Final Friday for Bull Run – Dow Death Cross Dead Ahead

INDU DAILYLook out below!  

With the Dow Jones Industrial Average having spent the past week below the 200 day moving average, the 50-day moving average has been pulled down and is now almost certain to cross below the 200 dma during the month of August in what Technical Analysts call a "Death Cross" and no, it isn't better than it sounds

Death crosses are clear indications that sentiment is turning bearish although it is possible that the Dow may power back over the 50 dma (17,900) and bend it back up before the fatal collision with the 200 dma – that would actually be a bullish signal.  

The Dow has gotten back over our Strong Bounce line at 17,700 for the week (see Tuesday's predictions), so we'll cut it some slack for now but yesterday we got a little more bearish in our Short-Term Portfolio, taking advantage of a cheap roll to improve our SQQQ position. We also had another chance to short the Russell Futures (/TF) at our 1,230 target, so we took that but we also took $500 per contract and ran this morning as it's Friday, and Friday's are dangerous days to trade the Futures.

As for the S&P, well the song remains the same on that index as we endure yet another prop job to take us back to our shorting spot at 2,130 (was 2,120 but moved up in May). Notice that there has been a much easier time using our system to short at the top than trying to guess where the bottoms are to go long (we don't like to go long when we're macro-bearish).   

[Chart via OfTwoMinds]

If you think we're going to breat this pattern, you have to be able to explain HOW we will break it?  Certainly you can't expect any help from the Energy sector or the Commodity sector as both of those are completely in the crapper at the moment.  The Financial sector lends money to Energy and Commodity companies who are in the process of restructuring their debts – that doesn't sound very promising, does it?  Transports have been terrible (also affected by low
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GDPhursday – Nothing to Get Excited About

We're waiting for the Q2 GDP report.

I certainly don't remember any economic reports in April, May or June that make me think it's a huge winner but Q1 was -0.2% and the S&P has climbed from 2,060 on April 1st to 2,125 (3.1%) on June 23rd – completely ignoring the bad data right up until the last week, when it then dropped all the way to 2,057 on June 29th, wiping out the whole quarter of progress in just a single week.

We nailed the top with a series of posts attempting to warn people to get out, starting that Thursday (6/18), in the article titled "Thursday Thrurst, Dollar Sacrificed to Save the Markets (again)" where I said: "Now the Dollar is at 94, which is 6% lower and the S&P has managed to claw back to 2,100, which is 2.4% higher.  When you consider the fact that the S&P 500's value is calculated from a formula that is based in Dollars, we've actually lose 3.6% in real value since the April lows but shhhhhhhhhhhhhhhhh – don't tell that to the bulls!

We called for shorting the Futures at S&P 2,100, Russell 1,270, Oil $60.95 and Gold at $1,205 and, even more brilliantly, we called the short on China's ultra-long ETF (CHAU) and picked up the Nov $65/53 bear put spread for net $8 and that's miles in the money now, looking for our full $12 return and a 50% gain.  

I'm not supposed to refer back to posts on PSW or Seeking Alpha won't run them but they didn't run my post of June 18th because it, in turn, referred back to other posts and the funniest thing was that our post of June 20th, which was a Seeking Aplha Trade Review, was also rejected by Seeking Alpha – AND WE WROTE IT JUST FOR THEM!  You see, it sets a very bad precedent when some authors are willing to be held accountable for their picks and 99.9% are not.

On June 19th it was: "Five Time Friday: Here Come Those Tears Again" where I said "It must be the third week of the month because that's the week the S&P gets to 2,120. It has happened every month since February and the
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Wednesday – Shanghai Surprise (Manipulation) Ahead of the Fed

Should we laugh or cry?

After dropping 100 points (2.7%) after lunch, the Shanghai Composite jammed up 175 points (5%) into the close and, combined with the pre-market pump that gave them a good open, resulted in a 3.4% gain on the day that NO ONE in the MSM seems to think is in the least bit strange.  

Yesterday I said: "Everything you used to laugh about regarding Russia's Pravda and Izvestia is EXACTLY what is now happening to the US media except, rather than government control – it's controlled by corporations, who determine what information YOU will be given each day." and Hanno on Seeking Alpha asked me what I meant by "YOU" and I said I mean non-PSW Members (the target audience for the morning post, the rest of our day is private) because "WE" at PSW learn to be very critical of the Mainstream Corporate Media.  As one of our Members said recently:

Subscribing to Phil’s site is like the Matrix – taking the red pill:

"You take the blue pill – the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill – you stay in Wonderland and I show you how deep the rabbit-hole goes."

You start to become educated at a different level – and the main stream media has diverged to such a degree that a normal conversation with friends that only casually follow the market is no longer possible. They’re still taking the blue pill – the banks, the fed, the govt. – all have put them to sleep.

It's a very appropriate conversation for what is to be a blue pill day, when the Fed is scheduled to release their statement (2pm) in which they will change a dozen words from the last statement and the Media will act like another tablet has been delivered from Mount Siniai when really (as is very apparent in the minutes) it's just a
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Testy Tuesday – Bouncing Back to Bull?

Wheeee, what a ride!  

Already this morning, EU markets have taken back almost all of yesterday's 1.5% drop as a rash of M&A announcements spur bargain-hunters in various sectors.  M&A announcements are a particularly desperate form of market manipulation on the part of the Banksters as these deals take months to put together and their announcements are usually timed with great care.

In this case, a group of deals have been rushed forward to give the sheeple the impression that the markets are undervalued but it's just the announcements of pending deals that have been accelerated to give you the impression that we're at some sort of bottom so, like the poor Chinese Retailers who ran back into the markets the past two weeks, you can take more shares off the hands of Banksters who failed to sell ahead of the drop and need another crack at it.  

The banks don't even care if they are screwing their own clients – they have hundreds of Billions at play in the markets and if rushing a deal gives them a 1% bounce for a couple of Billion, what do they care about the effect on their $100M fee (negligible anyway).  They certainly don't care what they are doing to the retail buyers – check out this typical story of how they are financially raping the farmers in China:

Oops, sorry, you can't check it out, it's been redacted on Bloomberg already (I was surprised they showed it in the first place).  This morning a video report on China followed a farmer who had about $200,000 in his account and was playing the market and, due to relentless Government promotions and the urging of his broker, he accepted a $1M margin account and continued buying stocks to record levels.  The bubble burst and he lost not only his whole $200,000 but now owes $200,000 to the broker.

He then takes a day's trip to Beijing to complain to the Government, in the naive belief that they will fix things for him because it was the Government's propaganda that got him to invest in the first place.  Of course, no one will even see him about his problem and he is forced to take the long ride home, where

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China Meltdown Part II – NOW Are You Paying Attention?

I told you so barely covers it on this one!  

China failed to provide the anticipated additional stimulus over the weekend or today and the Shanghai Composite quickly gave up half of the gains they made over the past two weeks of MASSIVE stimulus and rule changes that STILL have many stocks halted and this time no one was allowed to cover with short sales.  This morning, in fact, barely one in 100 stocks that were trading in Shanghai were not in the red with MOST of the index closing limit down.   THAT, my friends, is a catastrophe!  

As I noted on Friday, China's PMI showed CONTRACTION for the second month in a row DESPITE the MASSIVE stimulus – the only thing that would have been strange about today would have been a rise in the Chinese indexes.  This morning, rather than new stimulus, China reported (surprise!) that Industrial Profits had fallen 0.3%.  That's WITH the Government tossing Trillions at the market and WITH the CLAIM of 7% GDP growth.

You'll hear a lot of nonsense in the MSM but what's really spooking investors in China today is that you can no longer reconcile the country's fake economic data with the fake (but not as fake) Corporate Profits.  We discussed some of this nonsense, here, here, here and here – if you'd like to get up to speed.  

China consumes 40% of the World's coal, copper and steel and essentially acts as America's factory floor, making goods inexpensively, often in conditions that would not be tolerated in US factories.  To some extent, those lax regulations are now restricting China's growth as the air is unbreathable and the water is undrinkable to the point where it's affecting the fertility rate of their population.  

As noted by Morgan Stanley earlier this month, "Forget about all the shoes, toys and other exports. China may soon have another thing to offer the world: a recession."  China accounted for 38 percent of the global growth last year, up from 23 percent in 2010, according to Morgan Stanley. It’s the world’s largest importer of copper, aluminum and cotton, and the biggest…
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Using Stock Futures to Hedge Against Market Corrections

How would you like to make $7,175 in 4 days?  

That's the kind of money that gets even rich people's attention and it also happens to be how much money you would have made trading just ONE CONTRACT on each of our 3 Futures hedges from Tuesday Morning's post.  This wasn't some "secret" play, either – this was a public call to short the Futures (along with my explanation as to why you should) that was published at, and was tweeted out and put up on our Facebook Page - all before the markets opened on Tuesday.

Most traders are TERRIFIED of the Futures market but it's really not much different than the options market with the great exception being that it's open almost 24 hours a day.  That's what we LOVE about trading the futures – if we hear news that's going to move the market when it opens, we don't have to wait to make a trade that can profit from it.  In the case of these Futures shorts, we initiated those trades in our Live Chat Room at 5:50 am, where I said to our Members:

Dow having a particularly rough time with IBM dragging it down.  18,000 on /YM is still our shorting line there and 2,120 on /ES and 4,675 on /NQ and 1,270 on /TF is long gone (1,258) but below 1,260 is a good signal that shorts still work.  IBM is in transition mode and I still like them and they are missing from the LTP so I'll be looking for a play once the dust settles. 

We KNEW, for a FACT, that IBM had disappointing earnings (which we considered a buying opportunity) that would drag the Dow lower (because IBM is a key, price-weighted component) and Futures trading allowed us to take advantage by shorting the Dow Futures (/YM) at 18,000 before the market opened.  As it turned out, the 18,000 line did hold up into the open (see our premise on manipulated openings from the same day's post) and…
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Faltering Friday – China PMI Sinks, Singapore Slumps

I know, it's boring! 

Who wants to keep talking about stuff like China's PMI just posted CONTRACTION for the 2nd month in a row DESPITE the MASSIVE stimulus?  What we liked hearing were the ESTIMATES by ECONOMORONS, who said it would improve to 49.7.  As it turned out, up 0.3 turned out to be down 1.2 so our leading economorons missed this one by 500% but hey – we rallied into it!  

Don't worry, we're still one more dip away from breaking into the 2008/9 low range – at the moment, we're still holding on to the lows since 2011 but, unfortunately, China may have been too distracted propping up the markets to prop up the actual manufacturing sector.  That's one of the reasons commodities are collapsing – nothing is being manufactured on the World's factory floor.  

“The industrial sector has seen no sign of stabilization yet,” said Xu Gao, chief economist at Everbright Securities Co. in Beijing, adding that most of the growth stabilization last quarter came from the services sector. “The government should further step up the policy supports, including further boosting infrastructure investment and expediting the debt swap program.”

ROFL!  This is how our Global economy "works" people.  It's not up to the Capitalists to make things people actually want to buy – it's the Government's problem to make them profitable, no matter how much time and money is being wasted! 

Ray Dialo, of Bridgewater (the World's biggest hedge fund) has taken my advice and is now warning people out of China (a bit late but he finally came around).  

“Our views about China have changed,” Bridgewater’s billionaire founder, Raymond Dalio,wrote with colleagues in a note sent to clients earlier this week. “There are now no safe places to invest.”

Of course Ray, with "only" $169Bn under management, isn't really the World's largest hedge fund anymore.  That honor now goes to Apple's (AAPL) super-secret Braeburn Capital, whose sole purpose is to manage their own $203Bn cash hoard.

Braeburn, by the way,…
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Welcome Back My Friends

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"Welcome back my friends to the show that never ends
We're so glad you could attend, come inside, come inside

"Rest assured you'll get your money's worth
Greatest show in Heaven, Hell or Earth
" – ELP

As I said to our Members this morning, I was up at 3am and I did our usual pre-market skim of the news but I was so disgusted by the blatant manipulation going on at the Shanghai and in our own futures I decided to go back to sleep because it was simply too depressing to discuss.  

I want to start this article by apologizing to the Bottom 90% because we're about to steal your money again.  The way we (the Top 10%) do it is that we already own a lot of stocks because, well, because we have assets and you don't – because you are poor or, as Donald Trump calls it, "lazy".  

You have been too lazy to get a slice of "the pie" so, as you can see, we in the top 10% now have 78% of that pie (well mostly the top 1% because we have 38% but we like to pretend the next 9% are our friends to get them to do our bidding – even while the next 9%'s share of the pie shrinks as well).  If you had wanted some pie, surely you would have gone to an Ivy League School and started your own business and gone public by now – so we assume you don't like pie and we'll have some more thanks!  

Before the last crash, our slice of the pie in the top 10% was around 70% and you bottom 90% people had almost 1/3 of the wealth in your 401Ks and IRS and some of you even had businesses and equity in your homes (which we lend you money to buy).  We wanted more pie so we created the illusion that the pie was growing (on paper – in reality, there was no more pie) and that made the bottom 90% feel richer.  Then the top 10% sold some of their pie (mostly the stale bits) to the bottom…
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Phil's Favorites

Investing podcasts with Patrick O'Shaughnessy


Business vs. Investing, w/ Jason Zweig and Morgan Housel – [Invest Like the Best, EP.50]

My guests this week are both veterans of the podcast, Jason Zweig and Morgan Housel. They are two of the best in the world at making the complicated simple, and in that spirit, I’ll keep this introduction short. Morgan shifted from public markets to the private markets a year ago when he joined the Collaborative Fund, so we begin with what he has learned about venture capital in his first year on the job. ~ Patrick O’Shaughnessy

Notes and references here. 


Buying Companies With Economic Moats, w/ Pat Dorsey – [Invest Like the Best, EP.51]

My ...

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Lazada - The Amazon Of South East Asia?

By Guest Post. Originally published at ValueWalk.

You heard of of course, but what about Lazada? If you have not, you probably should have. Find out more below on the company and other e-commerce giants in Asia

Key Findings from the Map of E-Commerce made by iPrice Group

The potential of e-commerce in Southeast Asia (SEA) is irrefutable. With a population of more than 600 million people paired with predictions by giants such as Google and Temasek that the digital economy would become a US$25 billion industry by 2020, local and international players has emerged in the region to realise its full potential. Among the fastest growing countries in the SEA region is Malaysia. According to forecast, the Malaysian e-commerce is approximately worth USD$5.7...

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Will CRISPR fears fade with familiarity?

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


Will CRISPR fears fade with familiarity?

Courtesy of Patricia StapletonWorcester Polytechnic Institute

With all these ‘test-tube babies’ grown up, how have our reactions to the technology evolved? AP Photo/Alastair Grant

The first “test-tube baby” made headlines around the world in 1978, setting off intense debate on the ethics of researching human ...

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Zero Hedge

Jackson Hole Preview: Market Reactions, And Why UBS Says It's "Nothing To Skip Lunch Over"

Courtesy of ZeroHedge. View original post here.

Historically the annual Jackson Hole symposium has been a major market-moving event as it has traditionally been the venue where central banks make critical announcements such as Bernanke's preview and hints of QE2 and QE3 in 2012, as well as Draghi's suggestion of the ECB's QE in 2014. As shown in the chart below, market reactions following these events have been material.


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Digital Currencies

Cryptocurrency Hedge Fund Returns 2,129% YTD

Courtesy of ZeroHedge. View original post here.

We'll preface this post by saying we have never heard of the Alternative Money Fund - which "Specializes in Returning Freedom and Value" - and very well may never hear of it again, however it is notable for two things: i) it is a "hedge fund" invested entirely in cryptocurrencies and ii) it has allegedly generated a 2,129% return YTD, making it the best performer in hedgeco's ranking of asset managers YTD.

The "fund's" own description is similar to what one would find in any traditional asset manager, with one...

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Insider Scoop

5 Biggest Price Target Changes For Tuesday

Courtesy of Benzinga.

Related WUBA Benzinga's Top Upgrades, Downgrades For August 22, 2017 Watch These 8 Huge Call Purchases In Tuesday Trade Chinese Stock Is Gaining Ground (GuruFocus) Related SBUX ... more from Insider


Swing trading portfolio - week of August 21st, 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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Chart School

Weekly Market Recap Aug 20, 2017

Courtesy of Blain.

The story of 2017 has been “lack of volatility”.  There is finally some volatility entering the market, which is nice for those out there who like to actually trade a bit rather than buy and hold.  In last week’s recaps we noted the NYSE McClellan Indicator had registered an extreme oversold reading so a “rubber band” type of snap back rally could happen.

Thursday it hit an extreme level over -80 which we don’t see very often which can lead to short term snap back rallies.  But until we get back to sustained levels over zero caution remains in order.

So that “snap back” rally happened Monday – credit given to “an ebb in pressure between North Korea and the U.S. but the real headline should have been “the market was overs...

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Members' Corner

Why we need to act on climate change now


Why we need to act on climate change now

Interview with Jan Dash PhD, by Ilene Carrie, Editor at Phil’s Stock World

Jan Dash PhD is a physicist, an expert at quantitative finance and risk management, and a consultant at Bloomberg LP. In his thought-provoking book, Quantitative Finance and Risk Management, A Physicist's Approach, Jan devotes a chapter to climate change and its long-term systemic risk. In this article, Ilene interviews Jan regarding his thoughts on climate change and the way it can affect our futu...

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Mapping The Market

The App Economy Will Be Worth $6 Trillion in Five Years

Courtesy of Jean-Luc

This would be excellent news for AAPL and GOOG to a lesser extent although not inconsequential:

The App Economy Will Be Worth $6 Trillion in Five Years 

In five years, the app economy will be worth $6.3 trillion, up from $1.3 trillion last year, according to a report released today by app measurement company App Annie. What explains the growth? More people are spending more time and -- crucially -- more money in apps. While on average people aren't downloading many more apps, App Annie expects global app usership to nearly double to 6.3 billion people in the next five years while the time spent in apps will more than double. And, it expects the...

more from M.T.M.


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...

Learn more About Phil >>

As Seen On:

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 >>