Phil's Newsletter

Build a Berkshire Workshop – Members Only

"Build a better mousetrap, and the World will beat a path to your door."  

Of course we know that's not entirely true – even if you build a better mousetrap, if you don't secure the patents and fail to develop adequate production, marketing and distribution systems or fail to adequately control your costs – the World can be a very unforgiving place.  

Even if you do all those things right, you're only as good as your last quarter in the even more unforgiving stock market as the good people at BBRY can surely attest.  While there is a lot of money to be made betting on the daily and monthly swings of the market – Warren Buffett has shown us that buy and hold still has a place in this World and, in fact, outperforms all the noise over time.  

I'm not going to make this a post about Berkhshire – you can read my old post "Warren Buffett's Secret to Making 100% a Year" and you'll quickly get the gist of how much I like Warren and his company.  Since 1965, each Dollar invested originally in Berkshire stock has grown 586,817% vs 7,433% for the S&P 500 – an outperformance of 79 TIMES in 45 years – averaging almost 2x the S&P average each year and then left to the miracles of compounding! 

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Failing Friday – Not Even a Weak Bounce?

Yuch, this is getting ugly!  

The NYSE and the Russell, our erstwhile leaders, are now leading us down, having fallen over 2.5% from their Thanksgiving highs and, more importantly, finding no support at the 50-day moving averages.  Even worse, there's no panic-selling yet, no volume spikes, just a relentless grind down that has, so far, earased all of November's "amazing" gains that had everyone so excited.  

Well, not us, we were predicting doom and we got wisely to cash at the top but THEY (my fellow pundits) have never been more unified on the bull side and I had never felt more alone sticking to my guns while the market went up and up.  

Could I have been more bullish right up to the last minute?  Sure, but that would have put our MONEY at risk and we do not like to risk out money, plentiful though it may be in today's environment.  So plentiful, in fact, that Argentina needs 26.8% more of it to buy the same goods and services they bought last year and the police are now on strike, demanding wages that keep up with the surging cost of living, allowing looters to have free reign of the streets.  Government spending jumped 44% to keep up and relented to the police (33% raises) but now the public workers are threatening to strike too.

Is this the inflationary future for America?  Argentina's debt to GDP is just 43.2%, that would be like America having just a $7Tn debt and not $17Tn and rising.  Argentina will take a page out of the US book to fix inflation as well as their GDP – by adjusting the way they gather and report the data!  

We've already forgotten that the US boosted their GDP by 0.5% last Q by changing the way they value intellectual property like TV shows and films, adding hundreds of Billions of Dollars of implied value to potential re-runs of the Kardasians.  Not a mention of it last week, as we simply accept it as fact now – as if it's always been that way

And if all others accepted

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Thursday Thump – Is it a Bouncy Bottom or a Pause on the Way Down?


I love it when a plan comes together.  I'm not going to say "I told you so" – I think my 9am tweet on Tuesday already made that abundantly clear.  That morning post had already been published for our Members at 8:08 am, where I said:

Why then, do I prefer cash when there is so much money to be made?  Because, at this point in a bubble, it can all be taken away from you just as quickly, and the minute you lose site of that you are in BIG TROUBLE!  My question to you is, if you can make 20%, 40%, 50% on short-term trades like these, why leave anything on the table?  Make a trade, make your money and get back to cash.  Don't stay at the table and play until you give it all back!

At 8:23, our first Futures Trade Idea in Member chat was shorting the Dow (/YM) at 16,000 and shorting the Russell (/TF) at 1,130 and we were in and out a few times since but we caught 15,800 on the Dow yesterday for $1,000 per contract gained in 2 days and 1,100 on the Russell for a whopping $3,000 per contract in less then 48 hours.  This is what I was talking about – why leave money on the table when we can make hit and run plays like this?  

RUT WEEKLYAt 9:01 I reminded our Members to short oil at the $98.50 line, we rode those down for $1,000+ gains per contact below $96.50 yesterday and we're hoping oil goes back to $98 this morning so we can short them again!  As I said in last week's Webcast, where we made a short play on oil miles ahead of the drop, we saw no way that OPEC was going to get their act together to reign in the oversupply of crude.  

We also focused on the Russell as our favorite short, using 20 TZA Jan $19/23 bull call spreads at $1.86, selling 20 Jan $17 puts for net $720.  That spread finsihed the day yesterday at $2,180 for a $1,460 gain in a…
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Which Way Wednesday – Budget Deal Saves the Day

SPY 5 MINUTEWe have a budget deal.

We don't have all the details yet but it seems like unemployment benefits won't be extended and that means about 1.5M people will no longer be considered unemployed – problem solved!  The question for next week then is, will this cause the Fed to begin tapering and the answer is – NO!

Don't be silly, the Fed is not going to taper right before Christmas and we won't get the minutes of this meeting until late January so other than the usual 4-6 word change in the statement, what do people think is going to happen next Wednesday? 

This will not stop the Financial Media from filling page after page and hour after hour of TV time with endless speculation on what the Fed will do next week and what it means for the economy and the markets but we're not going to play that game.  They won't taper and then the media will seamlessly flip to speculating on the next meeting, giving no indication that they wasted your time for two weeks wondering about the last meeting.  

Of course, wasting your time is what the Media is all about.  160M Americans don't work at all and 40M of the 140M that do work are only working part-time so the MSM better distract the proles before they look around and realize how badly they are being screwed by the top 10M people, who have made 95% of the economic gains in the past 30 years.  

As long as we can keep our lower classess comfortably numb, all is well and we can keep on raking in the big bucks.  We held our weekly Webinar yesterday at 2pm and, at about 2:40, I showed our Members a simple way to profit from the end of day market manipulations on the Russell by selling TNA puts.  In this case, we sold the TNA weekly $72 puts for $2.22 into the close and they closed at $1.95, which was up 12% in about an hour and should do even better this morning.  Beats working at Wal-Mart, right?  

Even a Wal-Mart worker could have put some cash into our weekend trade on ABX (in a post we tweeted
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Technical Tuesday – Nasdaq Making New Highs, Will The Other Indexes Join?

Nothing but blue skies on our Big Chart this week.

The S&P came within inches of making a new all-time high and the Nasdaq made their new 13-year high while the Dow, NYSE and Nasdaq also reach for the skies in what David Stockman calls:

"The kind of speculative froth you get at the top of a cycle where valuation loses any anchor in the real world; from earnings or the prospects of the economy."

Well, Jimmy Crack Corn and we're in cash (so we don't care) but just yesterday, both Bullard and Fisher from the Fed said tapering is on the table at next week's meeting (but Fisher always says this) and,. more notably, Gov Lacker also said it would be discussed.  Discussion is not action but we may be getting close.

12-9-2013 6-04-26 PM RussellWhile the official unemployment reports have us down to 7%, the chart on the left from Zero Hedge gives you a much better idea of what's going on in the real World.  The number of employees actually working at the 2,000 companies that make up the Russell has dropped by 50% since 2007 and has made little, if any recovery since bottoming out in 2011.

The index, however, is up 169% since the 2008 low so the message to corporate America is clearly to cut the dead weight (employees) and don't go back to the old ways.  "America's Economy is Officially Inside-Out" says the Harvard Business Review, with the top 1% making 95% of the gains in this so-called recovery.  According to HRB: "The plain fact is that the average household is poorer in the “recovery” than during the “recession.”

When growth rises and living standards fall, that begins to hint that there is something wrong—very wrong, perhaps terribly wrong—with the way things are.  It suggest that what is happening to this society is not merely a simple, passing, self-healing ailment; but a chronic, possibly permanent, definitely debilitating condition. Not a flu—but a cancer.

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Monday Market March – Up, Up, Up

INDU WEEKLY"I've got nowhere else to go." 

That's what Richard Gere said to Lou Gosset in "An Officer and a Gentleman" and that's what the markets are saying to us as the Fed attempts to force them into a no-lose situation in which there is literally nowhere else to put your money other than equities.  The bank won't pay you interest, inflation erodes your cash, bonds pay next to nothing and margin interest has never been lower – why not play equities – you can't lose? 

Or can you?  As Dave Fry notes in his Dow chart, it's a micro-managed environment for equities and everyone knows "you can't fight the Fed" and bears can certainly attest to that this year as we've had a pretty relentless 3,000-point climb in the Dow.  We did run into a spot of trouble in the Summer, but that was fixed in October as GS, NKE and V were added to change the mix, which helped to goose the index another 1,000 points.  

BTCUSDIt doesn't matter how the Dow gained 23% this year, as long as they get to print that fact on the brochures, right?  Just like it didn't matter how Bitcoin came to print such a bullish picture as it rocketed up from $500 to $1,200, rewarding all dip buyers along the way.  These things always work out fantastically well – until they don't! 

One of the hardest things to teach traders is the value of PRESEVING wealth, as opposed to just making more of it.  If the market is going to go up and up and up in 2014, then we have hundreds of ways to make much, much more than 23%.  I'm just putting together a list of those ideas for our Members and, just like the beginning of 2013, when I had 3 bullish picks on January 5th, we can start 2014 off with some bullish selections as well – especially since we have such lovely support levels (16,000 on the Dow, 1,800 on the S&P, 4,000 on the Nasdaq, 10,000 on the NYSE and 1,100 on the Russell) to let us know when it will be time to get out. 

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Stock Markets Are Exploding Higher – Here’s How To Participate “Safely”

.NDX WEEKLYUp and up the markets go, where they stop, no one knows!

Well, we do know where they SHOULD stop, and that's here.  In fact, to be very clear – WE ARE SHORT THE MARKET HERE – many of our Members have gone to cash and our short-term trades are BEARISH, looking for a correction back to that 22-week moving average that you can see as a "gap too large" on Dave Fry's Nasdaq chart.  

BUT (and it's a Big But) just like we hedge to the downside on the way up (in case we're wrong), we should hedge to the upside too – just in case that correction never comes.  That's why we regularly run our series of "5 Trade Ideas that can Make 500% in a Rising Market" – those are the kind of high-leverage hedges every bear should have in their portfolio and, yesterday, in our Member Chat Room, I reviewed our most recent 5 trade ideas, from our pre-Thanksgiving post:

  • 10 QQQ March $83/88 bull call spread at $2.18 ($2,180), selling 1 AAPL 2015 $450 puts for $32.50 ($3,250) for a net $1,070 credit and we did this in the STP.   We just bought back the short AAPL puts and they are now $2,400 and the spread is net $2,830 so that's net $430 plus the $1,070 credit still in pocket is making $1,500 in 2 weeks (140%) – that's a good hedge!  
  • DDM April $105/115 bull call spread at $5, selling CAT 2016 $60 puts for $4 for net $1, now $2 (up 100%) – also got away already. 
  • 5 DBA 2016 $22/26 bull call spread at $2.20 ($1,100), selling 5 $21 puts for .65 for net $1.75 ($875) and one CAT 2016 $60 put for $400 for a net

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Non-Farm Friday, Is America Working?

SPY 5 MINUTEThe Futures are bouncing already (8am).  

We'll see how this pans out but it's been a crappy week and we'll yet again be watching our strong and weak bounce lines on the Big Chart, which I laid out for our Members in Wednesday's Chat, which prevented us from falling for the weak bounce that day and yesterday's lame pump job at the open – both of which ended up failing.

Today, we're back to the weak bounce lines in the Futures, kicked off by a weak Dollar (80.35), which will go up fast (and take down the markets) if more than 250,000 jobs are added – so good news likely to be bad news again today.  The bounce lines we're going to be watching are:  

  • Dow 15,910 (weak) and 15,970 (strong)
  • S&P 1,794 (weak) and 1,800 (strong)
  • Nas 4,030 (weak) and 4,040 (strong).  
  • NYSE 10,060 (weak) and 10,100 (strong).  
  • RUT 1,125 (weak) and 1,130 (strong).  

As you can see from our Big Chart, we have some serious tests at 4,040 on the Nasdaq, 10,000 on the NYSE and 1,120 on the Russell – all of which we should be above this morning.  Let's say that failing 2 of 3 of those lines would be a very bearish indicator and the quick money can be made by shorting the Nasdaq, who haven't come down much, at 3,490 in the Futures (/NQ) or below the $85.50 line on QQQ, where we should be able to buy the Dec $84 puts for .50 or less and a $1 move down in the Qs (1.2%) to approximately 3,990, should net us a quck 50% gain.

We had a lot of excitement in the oil pits yesterday with oil rising all the way to $98 at 10am but it was rejected there and back to as low as $97.20, before settling between $97.25 and $97.50, where we were able to play for nickels and dimes since.  

As promised, I sent out a tweet letting our followers know that we were shoring oil at 1:42 at $97.76 and that price held through 2pm, after which it was a very profitable
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Five Thousand Dollar Thursday – Oil Gives Us the Big Pay-Off

Wheeeeee, what a ride!  

We played oil short on the way up yesterda in our Member Chat and I know that sounds strange but oil was $97.50 in the morning, when we first shorted it and fluctuated around that line until the 10:30 inventories when, as expected, we got a nice $1 drop to $96.50, which was good for gains of $1,000 PER CONTRACT on the /CL Futures.  My idea to put 10 of those contracts into the Long-Term Portfolio was good for $10,000 just 3 hours after I wrote the post – not bad for a day's work.  Even better – this morning we're lined up to do it all again!

We had another nice drop from our $97.50 shorting line back to $97 for another $500 PER CONTRACT gain (x 10 = $5,000) and this morning we once again can do the same at $97.50 so please, don't say I didn't tell you so – because this is me telling your so!  Of course, if you want to make REAL money, you've gotta be a Bankstser like Blackstone (BX), who made AT LEAST $15.6M by buying a Credit Default Swap against a loan made by GSO Capital Partners to Codere SA in Spain (a transaction BX had no interest in).  

BX then arranged a $130M loan to Codere ON THE CONDITION THAT THEY DEFAULT ON THE GSO LOAN, which triggered the swaps and made BX instant profts of about 10% of their loan as a bonus.  I know it sounds like insurance fraud but it's actually legal (maybe not moral, but who cares if it makes money, right?) and BX was not the only Codere lender to benefit.  The company is complete junk (rated) and the more they borrow, the more the CDS's pay off!  



The Daily Show
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So no reason to feel guilty about paricipating in the NYMEX scam – we're saints compared to the Big Boys!  Don't forget, just like running up the price of oil and gasoline on weekends to screw US consumers out of Billions of Dollars each weekend at…
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World of Worries Wednesday – Is Bad News Still Good News?

SPY 5 MINUTEIt's happening again.  

Futures pump-jobs, big volume sell-offs at the open, low volume recoveries into the close and then a massive volume sell-off right at the bell to stick all the 401K and IRA suckers with all the crap stocks that are indexed under headliners like AAPL that the Banksters keep pumped up to cover their tracks while they head for the doors in the Christmas edition of Grand Theft – Stock Market.  

Speaking of Grand Theft, the EU fined C, DB, RBS, JPM and SCGLF $2.3Bn for rate rigging on Libor but only gave wrist-slaps to UBS, BCS and C for being good little whistle-blowers, which is funny because UBS and BCS were essentially the ring-leaders.  

HSBC, CRARF and JPM are still on the hot-seat for rigging Euribor and Tibor rates but the real news is that we may, in fact, have a free market going forward (yeah, right).  Still, being forced to play on a level playing field gave GS and excuse to slap a 2-notch downgrade on rival C and, of course, this and many, many, many more fines and regulations to come are why we aggressively shorted XLF on Monday with our FAZ spread.  

We were "only" up 233% at yesterday's close after our first two days and that's merely "on track" for what we hope will be a 3,900% gain on the .15 cash we used to fund the FAZ April $24/30 bull call spread at $1.20, offset with the short April $20 puts at $1.05.  Also doing well today should be Monday's FXI short 2016 $33 puts ($3.20), which more than paid for the 2015 $40/48 bull call spread ($2.20) for a net $1 credit – but that's a longer-term play with "only" 900% upside potential – hardly worth mentioning…

This morning, I already put out an early Alert to our Members, noting all the rotten economic news.  You can read all about it on my Twitter account, which you should really follow if you want to find out cool things earlier than everyone else.  Since then, we saw a 12.8% drop in Mortgage Applications and it seems that the
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Zero Hedge

Volume-less, Range-less 'Market' Sparks Largest Small-Cap Short-Squeeze In 2 Months

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

It's one of those days...

The last 4 days have seen the largest "short squeeze" in 2 months...

But the broad market went nowhere...

As Small Caps (heavily shorted) surged...

The market was glued to VWAP most of the day...


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Phil's Favorites

On the Verge of Consumer Exhaustion

Courtesy of Mish.

Fourth Quarter GDPNow Forecast Sinks to 1.8%

Following today's personal income report in which consumer spending rose only 0.1% month-over-month, the Atlanta Fed GDPNow Forecast for fourth quarter declined by 0.5 percent to 1.8 percent.

"The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 1.8 percent on November 25, down from 2.3 percent on November 18. The forecast for the fourth-quarter rate of real consumer spending declined from 3.1 percent to 2.2 percent after this morning's personal income and outlays release from the U.S. Bureau of E...

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All About Trends

Mid-Day Update

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

Click here for the full report.

To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Asia stocks mixed amid geopolitical tension, oil eases from highs (Business Insider)

Asian stocks were mixed in early trading on Wednesday as investors assessed the geopolitical risk surrounding Turkey's downing of a Russian fighter jet, while crude oil prices eased from two-week highs.

If China Killed Commodities Super Cycle, Fed Is About to Bury It (Bloomberg)

For commodities, it’s like the 21st century never happened.

The last time the Bloomberg Commodity Index of investor retu...

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Chart School

2-0 Bulls

Courtesy of Declan.

A second day for bulls to shine despite modest end-of-day gains. Some indices did better than others. The Russell 2000 was the key performer. It finished with a MACD trigger 'buy' and looks ready to outperform the Nasdaq 100.  This is an important development for bulls looking for more from other indices. A move to challenge - then break - its 200-day MA, would convert August-November action into a healthy basing action.

The Nasdaq registered higher volume accumulation as a brief sojourn below the 20-day MA was reversed. It's nicely set up for a push to new swing highs.


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Kimble Charting Solutions

S&P 500 – Dangerous for bull case, if prices turn weak here!

Courtesy of Chris Kimble.


The S&P 500 remains inside of a rising channel that has been in place since 2010. The 5-year trend is up.

The 5-month trend is a different story, at this time.

Over the past 5-months, the S&P 500 has created a series of “falling weekly closing highs,” which is represented by line (1) above.

The S&P is testing this falling resistance line at (2) above.

If weakness takes place at (2) above, at falling resistance, it would be concerning price action for the bullish case!


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Sector Detector: Bulls wrest back control of market direction, despite global adversity

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

Courtesy of Sabrient Systems and Gradient Analytics

Some weeks when I write this article there is little new to talk about from the prior week. It’s always the Fed, global QE, China growth, election chatter, oil prices, etc. And then there are times like this in which there is so much happening that I don’t know where to start. Of course, the biggest market-moving news came the weekend before last when Paris was put face-to-face with the depths of human depravity and savagery. And yet the stock market responded with its best week of the year. As a result, the key issues dominating the front page and election chatter have moved from the economy and jobs to national security and a real war (rather than police ...

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Swing trading portfolio - week of November 23rd, 2015

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

Bitcoin's Computing Network is More Powerful than 525 Googles and 10,000 Banks!

Courtesy of ZeroHedge. View original post here.

Submitted by Reggie Middleton.

I've decided to build our startup - Veritaseum, a peer-to-peer financial services platform, directly on top of the Bitcoin Blockchain. Many queried why I would voluntarily give up a lucrative advisory and consulting business to chase virtual coins in cyberspace. That's exactly why I decided to do it. That level of misunderstanding of what is essentially the second coming of the Internet gave me a fundamental advantage over those who had deeper connections, more capital and more firepower. I was the first mover advantage holder.

You see, Bitcoin is not about coins, currency or price pops. It is a massive computing net...

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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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Whitney Tilson On LL, EXACT, And Martin Shkreli


Whitney Tilson On LL, EXACT, And Martin Shkreli

Courtesy of Value Walk

1) The shares of one of my largest short positions (~3%), Exact Sciences, crashed by more than 46% yesterday. Below is the article I published this morning on SeekingAlpha, explaining why I think it’s still a great short and thus shorted more yesterday. Here’s a summary:

  • The U.S. Preventative Services Task Force’s Colorectal Cancer Screening Draft Recommendation issued yesterday is devastating for Exact Sciences’ only product, Cologuard.
  • I think this is the beginning of the end for the company.
  • My price target for the stock a year from now is $3, so I shorted more yes...

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Baxter's Spinoff

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

Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...

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Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 


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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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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.

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