Phil's Newsletter

Thrilling Thursday – Riding the Cobra

Wheeee, what a fun market! 

As you can see from our Big Chart, we are once again possibly forming those "spitting cobra" patterns I warned you about back on May 31st, with the S&P at 1,654, when I said

Big Chart – I don't like that pattern one bit. That's a spitting cobra pattern and usually they strike to the downside (and, before you ask, yes – I made that up). Still, very logical for the M to form down to the 50 dmas – especially as those 50s are right on major lines for the S&P, NYSE and the RUT and we know the Dow is too silly to worry about and the Nas is ruled by 10 stocks and 5 of them are AAPL so they also give funny readings but the 3 that are broad and hard to control are all lining up perfectly for a 2.5% drop.

The drop off came hard and fast after that and, less than a month later, the S&P was down to 1,560, down 5.7% on a slight overshoot, leading us to flip back to bullish.  As I said last week to our Members in Chat:

Just because we are long-term bullish doesn't mean we have to always have bullish positions – even in companies we love.  Sometimes, they just get overbought and we cash out and wait for the next pullback or sometimes, like NFLX or GOOG, they get so ridiculously expensive that we actually cash our longs and flip short on them.  

I already warned our Members this morning that the pre-market rally in the Futurres was FAKE (because all the indexes were moving up almost identically, like a lazy person was trying to make an impression) and we had a nice 2nd opportunity to short (with very tight stops over the line) the S&P (/ES) at 1,750, the Nas (/NQ) at 3,350, the Dow (/YM) at 15,400 and we're still wating for the RUT (/TF) to cross 1,110, back to the channel that led Wombat to make this comment yesterday:

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Wednesday Worries – NFLX Takes Traders on a Wild Ride

Original_16708895Is this the shape of things to come?  

NFLX punshished the shorts in the morning but then proceeded to destroy anyone foolish enough to buy them over that $325 mark the rest of the day.  I had mentioned, in the morning post, that NFLX was an example of how the market had become detached from reality – and this is what happens when reality reasserts itself.   

We already had some large, short positions in the stock, most recently a March $350/305 bear put spread we had added to our Short-Term Portfolio in our Member Chat on Monday (as well as a still-bearish adjustment in our Long-Term Portfolio), ahead of earnings.  As NFLX jumped SO high in the morning yesterday, we added 5 short Nov $400 calls at $11.50 ($5,750) in our Short-Term Portfolio and by the end of the day, NFLX had dropped so hard and fast that we simply bought back those calls for just $1.80 for a very nice $4,850 gain (84%) in 6 hours.  At the close, we used our 5% Rule™ to determine:  

The prior run was $240 to $320 (33%) but we'd really expect to see action at 40% ($336) and 50% ($360) and – well look at that – that's exactly what we got!  $240 to $320 was a "real" move and we expect $16 and $32 pullbacks from there to $304 and $288.  So, we know our NFLX supports on the way down should be $324 (short-term weak retrace), $318 (short-term strong retrace) and then, if $318 fails, we'd expect to see $304 (long-term weak retrace) and $288, which is where we'd probably look to go long for a bounce. 

We already sold the 2015 $250 puts in our Long-Term Portfolio, putting a value floor on the stock there earlier in the week. In our Long-Term Portfolio, we had 40 short March $340 calls at $50.25, which finished the day at $30.25, up $80,000 (40%) in 2 days as part of a spread, so let's call $350 the top of our expected range for NFLX.  

Our cover…
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$3Bn Tuesday – Our Oil Strategy Caught Over $3.9Bn in Gains in One Month!

Told you so!  

Come on, you have to give me that one!  Back on August 28th we went against SocGen's call for $150 oil, which spiked the NYMEX contracts to $112.24 that week and we came up with various shorting strategies to take advantage of the 360,000,000 barrels worth of FAKE!!! open contracts that were, at the time, scheduled for November delivery.  

Here we are, on the last trading day of the November contracts and all but 30M barrels (30,000 contracts) have been cancelled and half of those will be torn up today and moved to equally FAKE!!! December contracts, which are already bloated at 368,309 contracts (1,000 barrels per contract).  

Click for
Current Session Prior Day Opt's
Open High Low Last Time Set Chg Vol Set Op Int
Nov'13 99.06 99.10 98.79 99.02 07:21
Oct 22



-0.20 1164

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Monday Momentum Pushes New Highs into Earnings Week

INDU WEEKLYDave Fry sums things up nicely:

"Earnings and economic data don’t seem as important now. Reasonable PE ratios and dividend yields are passé. Savings will only be achieved through increased speculation in stock markets since that’s all the markets will give you. Traditional savings or other conservative and traditional savings methodologies are not attractive. Liquidity is still all that matters and with Fed Chair Yellen coming in QE and low interest rates should be with us for a long time. The character and demographics of the country will continue to change until it all blows up when the dollar and even its reserve currency status disappears."

There won’t be any debt ceiling battles since they’ll be banned. Government budgets will continue to expand beyond $17 trillion and beyond as long as buyers like the Fed buy what the Treasury must sell.

TLT WEEKLYDave also says "I’m just talking to myself it appears. But we need to remember our role, which is to make subscribers good rates of return even while raging at the machine."  I suppose we're in the same boat there (see my own weekend commentary in our Member Chat).  

Not only does a rush back to bonds signal a weak economy but oil is down to $100 (as we expected) and gasoline is down to $2.66, which is 15% LOWER than it was in July yet, for example, VLO, who sell refined gasoline products, is UP 20% since July earnings.  OIH (Oil Service ETF, who we are long on), are up 12% despite oil the 10% decline in the price of oil.  COP, who are rumored to sell a few barrels of oil in the average day, are up 15% since July earnings.  

How much sense does this make to you?  When things do not make sense, we prefer to get to CASH and cash, by the way, is a pretty good investment with the Dollar at the bargain-basement price of  79.77, down from 84.96 (6%)…
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Thank Google It’s Friday – Super Stock Takes Us To New Highs

Up, up and away

Right behind mighty PCLN, GOOG is closing in on the $1,000 per share club after earning $2.97Bn or $10.74 per $970 share.  What?  Oh sure, yes, $10.74 is just 1/90th of $970 BUT, keep in mind there are 4 (four) big quarter and 4 x $10.74 is $42.96 and GOOG was expected to earn $43.50 this year anyway and though they were SUPPOSED to make $10.34 so, of course a .40 beat means the stock should pop $10%, right?  

While $970 (a p/e of 22.5) may SEEM high for a company who's revenues only grew 12% (well behind the industry average 20%) where else are you going to stuff $29Bn of Uncle Ben's funny money overnight?  That's right, within minutes of the stock market closing, GOOG jumped 10% and added $29Bn of market cap in a matter of minutes.  I know $29Bn may not seem like a lot to us anymore but it is 29,000 Million dollars.  (Chart by Ycharts.)

On average, GOOG trades less than 2M shares a day x $800 = $1.6Bn so, from a cash-flow perspective, in order to sustain that price Google will need all 2M of those trades to be buys (all inflows) for 18 consecutive days to put enough cash into the market to justify that jump.  Luckily, that's not how the market works and usually it takes just 1/10th of the money coming in to "justify" a bump in price but, still, that's a lot of inflow needed to support this bump.


Still, we have to give props to the move and, technically, they are busting out and a technical market is what we're in, so we're not going to get short on GOOG but we will keep tight stops on our 2015 $800 calls, which we paid a virtual $115.07 for in our Long-Term Portfolio and shame on us if we don't take what's likely to be a double off the table if it starts to fade on us.  See last night's Member Chat for our thoughts on how to play that position, as well as ISRG and CMG – all very exciting today.

In the broader markets, everything's coming up…
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Thursday Threat Level Reduced: Debt Deal Reached – 90 Days Until Next Crisis

What idiocy! 

As I told you yesterday, the damage is done.  Extending the crisis past Christmas doesn't make it  go away and the Dollar fell 1% today on the "great' news that we "fixed" the debt ceiling.  So Congresses "fix" cost you 1% of EVERYTHING you EVER earning in your ENTIRE life.  It's all worth 1% less now – happy?  

If it took you 40 years to earn what you have, that's about 6 months of your life murdered by Government idiocy and, believe me, they are not done yet.  As I warned yesterday, this may only be stage one of the decline of the American Empire – just like Rome, we have Senators constantly plotting against the Emperor while lining their own pockets and doing anything it takes to remain in power, rather than actually trying to do what's right for their country.  

I was particularly disturbed this morning by a clip from the Daily Show which highlighted what's going on at the State Governemnt level with 26 GOP states refusing to cover millions of people who fall through the Medicare/Obamacare crack, which was meant to be covered by Federal Aid but GOP Governors, like Rick Perry, are refusing the aid – a political stand that is literally killing people!  

In the interest of being "fair and blanced," here's a good Conservative cartoon from, which, like almost all of the Financial Media, is a thinly-masked right-wing propaganda sheet.  Still, this they can make good points in that, regardless of who you want to blame for Obama's inbility to magically completely reverse 8 years of Bush destruction in less than 4 years, there are still a TON of problems facing us that this debt fiasco only managed to distract us from:

Notice how they use the word "gravity" because it's a popular movie at the moment and, despite the fact that the cartoon has nothing to do with gravity,…
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Will We Hold It Wednesday – Congressional Edition

Will we get a debt deal today?  

Watching this Daily Show interview with a GOP strategist, I still have my doubts.  Once again the House of Representatives dropped the ball and once again the Senate is saying reassuring thing and once again the Futures are back up in hopes that things will be better now – it's MADNESS!  

It would be funny if it wasn't so sad.  Yesterday, the House of Representatives failed to even manage to agree with each other on a bill to present to the Senate, putting the ball back in the Senate's court today as Harry Reid and Mitch McConnell hold talks to hammer out an agreement that they, in turn, will present to the House this afternoon.  

imageThat doesn't actually solve anything as the House has to then pass the bill and, so far, they have refused to even hold a vote on one during this entire crisis.  Even if we do pass a bill, it is very likely to be only a stop-gap measure that funds our Government through Jan 15th, raising the debt ceiling through Feb 7th – and then we're back in the same situation again.  Meanwhile, Fitch has already put the US's credit rating on negative watch and China is already taking full advantage of our screw-up and is brokering a deal with the UK to bolster the Yuan as an International alternative to the Dollar.  

Ted Cruz has, in this way, done more for China than Mao Tse Tung, driving the Yuan to record highs against the Dollar and possibly setting the dominoes in motion that will dethrone the Dollar as the World's reserve currency – a change that would have MASSIVE negative repercussions for the US Economy:

"As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it

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Catch Our “Can’t Lose” Trade Idea From Last Week’s Seminar

Last Tuesday we held our first joint Webinar with our friends at OptionMonster.  

Pete Najarian joined me for a one-hour presentation (see Replay Here) that was based on PhilStockWorld's fall theme of teaching our Members to BE THE HOUSE – Not the Gambler.  

Speaking of casinos, there are still some seats available for our LIVE, 2-Day Seminar in Las Vegas on November 10th and 11th that we'll be presenting along with Market Tamer – another one of our education partners.  I believe Caesar's rooms are sold out but we still have fantastic rates at Ballys – use the booking code Bally's booking code SBPHI3 (800 358-8777) and mention our conference and Saturday rates are just $125 with $55 on Sunday (other nights available as well).  

We also want to extend to you an opportunity to join our friends at Option Monster for their seminar in San Francisco on October 25th and 26th for the very special price of $399.   Aside from Jon and Pete, Guy Adami will be there as well as Dan Fitzpatrick, Tem Reazor, Jeff Macke and others.  

Knowing and UNDERSTANTING how to BE THE HOUSE – Not the Gambler gives you a tremendous market advantage over time.   We had several trade ideas for our Members that are all well on their way to paying for the seminar, and even the entire trip to Vegas (First Class!) on our bigger trades, using CZR, which has been on a wild ride and will continue to be so at least until the 17th, when they plan a $1.8Bn stock sale of a spin-off Caesars Growth Partners, which will handle the on-line gaming and two casinos in exchange for $1.18Bn kicked back to the parent company (who still control the new Co., of course).  

During the seminar, we revealed what SEEMS to be a trade idea that CANNOT lose money.  That's right, if we did our math right, we found a no-risk trade that pays $3,500 in profits by November 15th.  Will it hold up?  What was the trade?  Sorry, you have to watch the seminar to find out but, as of this morning, the trade was STILL available.  

Watch our seminar where we discussed many great trade ideas, to help fund your trip to Vegas or San Francisco while you put time and market tides work for you! 

Hope to see you there, 

- Phil


Triple Top Tuesday – Here Come Those Tears Again

Baby, here we stand again where we've been so many times before

Even though you looked so sure as I was watching you walking out my door

But you always walk back in like you did today

Acting like you never even went away

Here come those tears again - Jackson Browne

What a rally!  

Yes, we missed it.  Though we've had plenty of long-term winners (see September Trade Review), we certainly weren't expecting this short-term pop in the face of all this uncertainty surrounding the debt ceiling.  Our short-term portfolio lost $6,000 (down 20%) in the last week as we kept taking pokes at a possible sell-off that never (so far) came.  

SPY 5 MINUTEBulls continue to hang their hat on continued Fed easing and there's the undercurrent of a celebration that uber-dove Janet Yellen will take the helm in January and, already, they are talking about MORE QE than the $85Bn a month that is currently being pumped in to support the markets.  

As you can see from Dave Fry's SPY chart, we're falling into a daily pattern of getting a massive pump from POMO, the daily injections of Billions of Dollars in Fed Funds to the Primary Dealers like GS and JPM who, in turn, use it to manipulate the market and paint the pretty picture we see on the Big Chart.  

Today is an extra big one – about $5Bn will be placed today as part of a $16Bn week in Treasury puruchases alone!  Of course that's par for the course on option expiration weeks, when the Banksters need a little extra cash to hit their targets on Friday – regardless of the Fundamentals.  

Speaking of Fundamentals, KO came in-line on earnings this morning with year/year revenues…
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Monday Market Meltdown – Again

Does this seem familiar to you?

This is how we began last Monday's post as the House failed to pass a debt deal and the markets begain to panic after having popped 100 points on Friday in anticipation of a revolution.  Those who forget the past yadda, yadda, yadda - I suppose.  

We started last week at 15,100 on the Dow on Monday, fell to 14,700 on Wednesday, rallied back over 15,100 on Thursday and now back to 15,100 at the open this morning (Futures down about 100 points). Isn't this silly?

We could have yadda-yadda'd all of last week and wouldn't have missed much – except some fabulous gains in oil, of course, as we got all the way back to $100.50.  This morning we caught a nice ride from $102.50 back to $101.25  for a $1,025 per contract gain from our entry in early morning Member Chat but, at this point, I certainly hope you don't need me to tell you what lines we're shorting oil at!  

We're actually hoping oil goes up now, as we cashed in our USO/SCO positions and we'd like to add more back.  Also, like last Thursday – how much more fun is it when we get a nice BS pop to ride back down?  Like any good roller coaster – you have to sit and wait for the car to get to the top of the tracks again before you get that exhilarating "WHEEEEEE!!!" we enjoy so much (and you do not need a degree in rocket science to see that it's a good idea to go LONG at $102.50 until it breaks back under and we can flip back short).  

The same goes for our indexes as well.  As you can see from our Big Chart, we got almost a full retrace on the Russell and that led us to get aggressive in our Member Chat on Friday and pick up 40 TZA (ultra-short Russell mentioned in Friday morning's post) Oct $23 calls for our Short-Term Portfolio at an average of .625.  Those can put up some extremely nice gains if the markets pull back again as those calls were $2.30 on
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Zero Hedge


Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Just around the corner, indeed.



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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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Phil's Favorites

German Central Bank Lists All It Gold in 2,302 Page Report

Courtesy of Mish.

In response to numerous allegations of missing gold, stolen gold, gold filled with tungsten, rehypothecated gold, leased gold, etc., Germany's Central Bank has Listed All of Its Gold. In 2012 the Bundesbank found itself at the center of a storm when the German Federal Court of Auditors called on the central bank to physically take stock of its gold holdings outside the country as they had never been assessed. The Bundesbank opted not to accede to the auditors' request and do a stock take on its gold, noting that there were "no doubts about the integrity, reputation and safety of these foreign depositories.”

This response proved to be ill-judged as it only served to fuel speculation over the safety of German ...

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Kimble Charting Solutions

Did The Retail Investor Just Panic?

Courtesy of Chris Kimble.

This mornings post is from good friend Ryan Detrick. I am a big fan of using sentiment to get an edge in trading.  What I’m looking for are assets that are widely hated or widely loved – then going the other way.  In the end, price is the only thing that pays, but over the years I’ve found also considering sentiment can greatly help your portfolio as well.  The issue with using sentiment polls is the person doing the voting might not be telling the truth.  They could simply be talking their book.

Doing one thing, but saying another.

Well, there’s a new sentiment poll that takes care of that for us and looks at what real active inve...

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Insider Scoop

Citi Initiates Sell On JC Penney, Says Any Increased Operating Cash Flow Will Be Match By Increased CapEx, Expects FCF To Remain 'elusive' For Foreseeable Future

Courtesy of Benzinga.

Related JCP JC Penney Flirting With $10 Again Investors Cheer JC Penney Inc. Pension Obligation Redcution Citi starts J.C. Penney at Sell; shares slip (Seeking Alpha)

Citi PT Is $7.00

Latest Ratings for JCP DateFirmActionFromTo Oct 2015CitigroupInitiates Coverage onSell Sep 2015Sterne Agee CRTUpgradesNeutralBuy Aug 2015Deutsche BankUpgradesHoldBuy

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China to join Russia in Syria war


China to join Russia in Syria war By  at Value Walk

While Russia successfully bombs unidentified targets – either ISIS or U.S.-trained rebels – in Syria, China is planning to join Russia’s own emerging coalition by deploying Shenyang J-15, a carrier-based fighter aircraft.

Numerous reports have indicated that China is joining Russia’s airstrike campaign in Syria, which has killed at least 39 civilians, including eight children and eight women.


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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Here’s how Apple, Nike and others avoided $620 billion in taxes (Market Watch)

Big U.S. companies are holding more than $2.1 trillion in profits overseas and are avoiding paying about $620 billion in U.S. taxes, according to a study released Tuesday.

The study by liberal groups Citizens for Tax Justice and the U.S. PIRG Education Fund found that nearly three-quarters of Fortune 500 companies had at least one tax-haven subsidiary in 2014. Bermuda and the Cayman Islands were the most popular tax-haven destinations.


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Chart School

Markets Hold Bulk of Gains

Courtesy of Declan.

Most of the gains were posted pre-market, but bulls were able to hold gains after a couple of days of bullish strength.

The S&P is on course to finish with a spinning top doji. The 50-day MA is just overhead and close to 2,000 psychological resistance. Technicals are close to turning net bullish.

The Nasdaq closed above 20-day MA and has room to run to overhead resistance. Like the S&P, it 's close to turning net bullish technically. Today was a typical consolidation, which given recent price action should be viewed as bullish.


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Sector Detector: Searching for solid support in the face of global headwinds

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

Courtesy of Sabrient Systems and Gradient Analytics

Uncertainty about the health of the global economy led investors to flee U.S. equities during Q3, primarily driven by worries about China's growth prospects and the Federal Reserve’s decision to not raise rates. Sure, there are plenty of real and perceived headwinds, but on balance it seems that a recession here at home is not in the cards. And when you consider sentiment and the technical picture, it appears that a continuation of Friday’s bounce is in store. The question remains as to whether the seasonally strong Q4 will be able to propel the bulls through levels of resistance that have built up.

In this weekly update, I give my view o...

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Swing trading portfolio - week of October 5th, 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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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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Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene


The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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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!

FeedTheBull - Top Stock market and Finance Sites

About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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