Phil's Newsletter

PhilStockWorld August Trade Review – Riding the Rapids (Part 2)

We completed part one of this review on September 1st.

Now it's the 22nd, 3 weeks later and we've given our late August picks enough time to mature (like fine wines) and now we'll uncork them and see how they came out!  The last day we reviewed was August 9th and we had begun shorting Russell Futures (/TF) at 1,050 and they were up $2,800 at the time of the review (9/1) but, since then, the market has recovered – A LOT – and the Russell is back to 1,069.

Hence the transient nature of any trade reviews – they work until they don't and they don't work until they do.  The real trick is learning to take a profit – when and if they come along.  In the first 10 trading days of August, we had 50 trade ideas that were NOT part of one of our virtual portfolios and 42 (84%) of them were winners as of Sept 1st.  As you can see from the IWM chart above, the end of August was a choppy mess.  We'll see how we did on those picks but it's hard to imagine such a strong average in that kind of chop.

Aug 12: Monday Momentum – Quadrillion Yen Stimulus Not Enough to Keep Japan Going

From a Fundamental perspective – our expectations are higher because the market is higher and we have to look at this incoming data while asking ourselves the question: "Is this data good enough to justify all-time market highs?"  Of course we know the market is "juicing" on Economic Steriods – that's not the point because it's not "illegal" and they're not going to have to stop using stimulus -  but all-time highs are the big leagues.  They are the playoffs, in fact, and now they have to be turning in performances that are the best of the best or else the fans (investors) can turn on the markets very quickly!  


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From the Education Archives at www.Philstockworld.com:

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Quad Witching Friday – Options Expire Amid 4 Fed Speeches

NYMOStrap yourselves in folks, it's going to be a wild one!  

As I told you on Wednedsday morning, we were getting way too overbought to keep going much higher.  This stuff isn't complicated folks, it's just physics.  When the Market did pop after the Fed at 2:30 on Wednesday, I said to our Members in Chat:

Gotta love IWM at $107 (RUT 1,070) for a short.  Actually, TZA is more fun with the Oct $22/25 bull call spread at 0.96 so 20 of them in the STP to start and happy to DD if they get cheaper.  

That was, so far, the bottom of TZA and that thing is going to fly if the Russell falls back below 1,070, so it's a fantastic hedge that pays $6,000 back on $1,920 if TZA gets back to that $25 line into October expirations.  We also took the opportunity (4 minutes later) to sell FAS calls into the spike in XLF, with me saying to our Members:

FAS/STP – Let's sell 5 Oct $80 calls for $1.55 ($775) and we'll buy more longs if they hold $75 into Friday (also riding out the short $70 call, now $7).

Already yesterday, those FAS short calls closed at $1.30, which is up a quick $75 (10%) in just one day.  These are action/reaction plays and we had a discussion in Chat, in fact, about how understanding implied volatility and the way it changes and affects option pricing helps you gain the confidence to make these day trades.  Also, by the way, I'm not really an "I told you so" kind of guy but, if I don't point out that I told you so – then how will you know the next time we see a similar thing that maybe I know what I'm talking about?  

Oh boy did I tell you so – over and over again –…
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Stocks Go Parabolic Without Taper to Hold them Down

Holy cow, look at that Dow line:

We have gone from 14,700 to 15,700 (6.8%) in 3 weeks.  At this pace, we'll be at 19,000 by December 31st and over 20,000 in January and 32,000 at the end of next year!  Wow, that is so normal, right?  

Of course, the Fed DID put $1Tn into the market yesterday.  Actually it was more like $2Tn because they are continuing to put $85Bn PER MONTH ($1Tn per year) into the markets through QE but they also withdrew $1,000,000,000,000 – not just from your savings account – but from every single asset you have, when they devalued the Dollar by 1% yesterday.

That's right, the US Dollar responded to the Fed's complete lack of respect for the money supply by dropping a full point yesterday and now sits at 80.03, down 4% since the Dow began rising 6.8%.  Since the Dow is priced in Dollars – doesn't that then mean that the Dow is really only up 2.8% in a steady currency?  14,700 + 2.8% is only 15,111, not 15,677 and 15,111 is STILL below the 5% line.  If I'm right, then 15,200 is going to be serious resistance and we can expect the Dow to grind to a halt 89 points from now, at 15,766 so that will be our new shorting target (if they even make it there).

Original_15897635It is like pulling teeth getting TA people to understand that TA is USELESS if you don't take currency fluctuations into account.  It's like looking at a temperature chart shooting up suddenly and then the guy drawing the chart says – yes, I used to measure in Fahrenheit but I switched to Kelvin last week and things really warmed up!  

Sorry, but we were doing geek jokes yesterday and I'm still stuck in that mode…

Anyway, clearly any rational person understands that you can't have a chart where the units you are measuring in change while you are graphing your points.  NORMALLY, we expect some currency fluctuation as it tends to even out over time but, looking back to 2003, when the Dollar was worth 107 against a global basket of currencies – we can see that the long-term…
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Which Way Wednesday – Waiting on the Fed – Again

.SPX WEEKLYHere we go again!

Dave Fry drew the line and all we have to do is break over it today and we're at new all-time highs on the S&P 500.  It is widely expected that the Fed will begin to "taper" today, cutting their $85Bn monthly injections of cash into the markets down to about $70Bn – so they'll "only" be pushing $940Bn a year into the system – not over $1Tn anymore.  

Even the thought of this small change has sent commdoities lower – notably gold, which has fallen back to the $1,300 line with silver at $21.62 and copper at $3.25, which is down 13% from $3.75 at the beginning of this year and indicates that this market rally (up over 20% for the year) has nothing at all to do with demand and everything to do with supply – of money!!! 

NYMOMORE FREE MONEY is chasing the same amount of stocks and bonds (consumer and corporate spending are flat so it's not going into goods and services) and that's depressing the rates bonds need to pay to attract the deluge of cash while pumping stock prices to the moon and beyond.  So much so that the McClellen Oscillator is now pegging the most overbought it's been since mid July, the last time the S&P topped out (1,709 was the 8/2 high). 

We went over the ramifications of this our Member Chat Room this morning so I won't re-hash it here but it's something we're going to be paying very careful attention to today.  We remain bullish for the moment (see last Tuesday's post) but also skeptical that we'll be making those new highs – or keeping them, at any rate…

No, this is not a chart of One Direction fans vs how much skin Miley Cyrus keeps covered, this is a chart of the Monetary Base of US Dollars ($2.7Tn, up from $800Bn in 2009) vs the CPI (lower) over time.  As I pointed out at our Atlantic City Investing Conference in April – it doesn't matter how much SUPPLY of money you have if the VELOCITY is low – you still won't boost prices.
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Timid Tuesday – Indexes get Gun-Shy as they Re-Test the Tops

SPY 5 MINUTEThat was disappointing! 

Things started out very exciting as we opened the S&P at 1,704 and ran all the way to 1,705 for a second there, just after noon but then reality stepped in and ruined the mood.  The Dollar had bottomed out at 81.13 but bounced back 0.5% to 81.55 and that, of course, took the S&P down 0.5% (because they have that kind of relationship) and we had a sad little close.  

On Dave Fry's SPY chart, it's 170 but, on the Index itself, we're testing 1,690 in the Futures this morning, down from 1,703.75 at yesterday's highs – pretty much the same thing but our goal for the index is 1,709.67 – that's the August 2nd high and that's what needs to be cracked on this run or the next time we test our +5% line at 1,680, it may not hold. 

Speaking of lines, it's no surprise, looking at our Big Chart, that the Nasdaq pulled back hard yesterday, dropping about 40 points (1%) from it's silly open to the more realistic close at 3,718.  As you can see from our spreadsheet (which is the real Big Chart, the rest is just illustration) the invisible string between the Nasdaq, the NYSE and the NYSE (both still below the Must Hold lines) was stretched more than 10% and either they had to go up or the Nasdaq had to come down.  

Of course AAPL tends to warp the Nasdaq but AAPL is DOWN $50 since the August highs and that's 10% so it SHOULD have a 1.4% drag (now 14% of the Nasdaq) on the Nasdaq but the Nasdaq is HIGHER than it was in August, when it was just below 3,700.  So, if AAPL is dragging the Nasdaq 1.4% lower but the Nasdaq is, in fact, 2% higher – then QCOM (7%), MSFT (5.5%), ORCL (4%) GOOG (4%), INTC (3%), RIMM (3%), CSCO (2.5%), AMZN (2.5%) as well as ATVI, EBAY, BIDU, COST, FSLR, NWSA, SBUX, PCLN, etc (1%ish) must be MORE than pulling their weight.  

That means the SQQQ ETF (ultra-short Nasdaq) is a nice way to protect yourself from a broad-market pullback.  SQQQ is $21.66…
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Manic Monday – Summers Out, Syria Solved, Markets Flying!

The Futures are flying!

Everything we were worried about is "fixed" and most of the Global markets are snapping higher this morning.  That suits us just fine as we got much more aggressively bullish at our Strong Bounce lines on Tuesday (see "5 More Trade Ideas that Make 500% in an Up Market") and, even better, we nailed it again on oil, which is DOWN to $106.50 again this morning (/CL) for $2,000 PER CONTRACT gains!  

As I said on Tuesday: "I can only tell you what is going to happen and how I think you can make money trading it – the rest is up to you!"   On Thursday morning I said trading the Nikkei to fall on a rising Yen was the second easiest trade on the planet (it dropped 150 points that day), with the first being shorting oil (/CL Futures) at $108.50 that morning.  If you are one of our Members (and if not, why not?) or if you read our posts regularly, you know WHY we were shorting oil last week, so I won't rehash it here.  

Original_15816244

$106.50 was our primary target for oil to drop, but we do expect to test $105 between now and Friday - perhaps much lower if we are lucky.  We moved our USO puts to October, just in case oil took longer to fall than we thought but our very aggressive SCO (ultra-short oil) position stayed open over the weekend and would pay off VERY nicely at $105 or lower. 

Sep(_Fed Hawks & DovesEurope is still a mess, Asia is a boarderline disaster and the bottom 80% of our country can barely bring themselves to get out of bed in the morning but – So What? – MORE FREE MONEY!!!!  That's the deal from the Fed this week (or so the bullish traders believe) and we should be able to peg those highs again, at least until Wednesday's FOMC Statement (2pm) or Bernake's 2:30 press conference after the meeting.  

Friday is a regular Fed-A-Palooza, with George (hawk) speaking at 12:30, Tarullo (dove) at 12:40, Bullard (hawk) at 12:55 and Kocherlakota (hawk) at 1:45 to close out the quarter on a Quad Witching Options Expiration Day.  I am declaring Friday an UN-Vacation.  You CANNOT be away that day –…
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Flattish Friday – Waiting on the Fed Next Week

My apologies to all.

My flight was delayed until after 1am and I didn't finally get to Florida until after 5 and then, in a comedy of errors, I passed out without setting an alarm AND my Mom isn't here so no one woke me up!  So, a bit behind is an understatement but let's use this spot while I find out how to get here wifi working (oh yes, and ANOTHER thing that's going wrong this morning – I'm typing this on a PC that I think runs on coal!  

 





Thrilling Thursday – Nasdaq Presses on Without Apple Support

QQQ WEEKLYWhat an exciting index!  

On Tuesday, as one of our "5 More Trade Ideas that make 500% in an Up Market", we went long on 16 QQQ Jan $75/80 bull call spreads at $3 ($4,800) and paid for them by selling 2 ISRG 2015 $300 puts for $23.50 ($4,700) for net $100 on the $8,000 spread in our virtual Short-Term Portfolio.   

Yesterday morning, however, AAPL decided to take a nose-dive pre-market and, because we were stuck in the spread (as well as long AAPL spreads), I sent out an alert to our Members early in the morning (7:22) to cover with short Nasdaq Futures:

So shorting /NQ at 3,175 is a good way to protect the AAPL longs in the STP.  The Nasdaq Futures pay $20 per point so 10 contracts pays $2,000 on a 10-point drop and a tight stop over 3,175 limits the losses

We hit our $2,000 goal (3,165) at 9:35, just minutes after the market opened, so my first comment to our Members for the morning was:

That's the $2,000 goal on the short /NQ futures and the weekly $495 calls can be bought back for $.40 so done with those in the STP and the $490 calls are $.72 and we'll keep our fingers crossed that we get more of our $2.50 back

That's how easy it is to use the Futures for quick hedges on your positions when you have market-moving news outside of trading hourse.  While we discuss many things at our upcoming Las Vegas seminar, nothing is more important for active traders than learning how to use this valuable tool – the same one that lets us use the energy markets like an ATM!  

The best part is, we got out at just the right time, went even longer on the dip and now we're right back on track.  As I keep saying to our Members,
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Will We Hold It Wednesday – Top of the Market on 9/11

NYMOAre we overbought yet?  

Not so much according to Dave Fry's NYMO chart, where it looks like we can get away with another few days before gravity takes its toll on our indexes and that will take us right into next week's Fed meeting and… uh oh…

Darn, we were so worried about International terror with Syria and China that we forgot about the Domestic Bankster Terrorists, who are celebrating 40 years of destroying the working class (since Nixon took us off the gold standard and allowed workers to be paid in scrip).  

 

Since that time, the scam has been refined and now, as you can tell from this chart, we have lost the majority of the "feedback" we used to get from Domestic Manufacturing jobs and have, instead, substituted the supply of fresh money by having the Fed simply print it, hand it to the banks, who drive the consumers into debt to keep things going for another cycle.  

But the banks aren't even lending to bottom 90% consumers anymore, they are lending to the manufacturers and retailers who are busy buying each other with all the free money (artificially inflating their stock prices) or buying back their own stock (artificially inflating their stock prices) or investing in automation that enables them to lay even more people off (naturally inflating their stock prices).  

The question is, are ther manufacturers laying off workers fast enough and saving enough money to justify the artificially inflated prices (from M&A) that were based on their POTENTIAL to do the same.  You may have noticed that I didn't mention expanding sales.  That's because our global GDP is up 2% and our stock market is up 20% so this is not real expansion of commerce, sales gained by one seller are lost by another for the most part.  

There's nothing wrong with this plan, from the view of the top 1%.  We can, in theory, keep expanding our profits for quite a long time as Corporate Profits (the ones we report, wink wink) are only 10.3% of the GDP after taxes but…
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Zero Hedge

The Failed Moral Argument For A "Living Wage"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Ryan McMaken via The Mises Institute,

With Labor Day upon us, newspapers across the US will be printing op-eds calling for a mandated “living wage” and higher wages in general. In many cases, advocates for a living wage argue for outright mandates on wages; that is, a minimum wage set as an arbitrary level determined by policymakers to be at a level that makes housing, food, and health care “affordable.”

Behind this effort is a philosophical claim that employers are morally obligated to pay “a living wage” to employees, so they can afford necessi...



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Chart School

Stock Market Song for Aug 2015

Courtesy of Read the Ticker.

Time for a funny, need to loosen up a bit!

This is a song from a New Zealand Band called SplitEnz founded by Tim Finn. Tim Finn brother Neil also joined the band, and latter left to form the band called Crowded House.

The song is I SEE RED, and those in the market are seeing a lot of RED these days on their trading screen.





NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net

Investing Quote...

......



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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

US Role in Europe's Refugee Crisis; Migration in Numbers; Dead Baby Syndrome; Australia PM Promotes Hard-Line Stance

Courtesy of Mish.

Crisis in Numbers

With an influx of 800,000 migrants, per year, and rising steeply, Europe struggles with what to to with the refugees.

Here's the Migrant Crisis in Numbers.
The EU is struggling to respond to a surge of desperate migrants, thousands of whom have perished in their attempts to seek a better life in Europe. Where are they going and where are they coming from?

The largest group of people reaching Europe through the Mediterranean or the western Balkans are Syrians fleeing a civil war, but there are also many from Eritrea and Afghanistan, as well as Kosovo and Nigeria. EU Migrants

...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Inflation risk neglected by smug markets (Financial Times)

Students of economic history often marvel at some of the phenomena and oddities of past eras such as feudalism, giant stone currency, tulip bubbles and the gold standard. Perhaps in the future inflation will be added to the list of quaint, incomprehensible quirks banished to the history books.

That, at least, seems to be the conclusion of many investors and economists. Aside from a motley group of stubborn doomsayers — who have loudly and wrongly predicted the outbreak of hyperinflation since the financial crisis — the feeling in markets is that inflation is not just an inconsequential dange...



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Kimble Charting Solutions

Shorting Russell 2000, Joe says nice looking breakout

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

The Russell 2000 inverse ETF (RWM) has had a rough 6-years, falling a ton in price ($500 to $62). If one has owned if for a long-time, its not been fun to say the least.

A couple of weeks ago RWM broke above triple resistance at (1) above and Premium Members bought the ETF on the breakout.

At this time the price action looks ok.

Should RWM break above $66, it has the potential to take off!

If you would like to receive this type of information on a daily basis, I would be honored if you were a Premium Memb...



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OpTrader

Swing trading portfolio - week of August 31st, 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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Sabrient

Sector Detector: Finally, market capitulation gives bulls a real test of conviction, plus perhaps a buying opportunity

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

Courtesy of Sabrient Systems and Gradient Analytics

The dark veil around China is creating a little too much uncertainty for investors, with the usual fear mongers piling on and sending the vast buy-the-dip crowd running for the sidelines until the smoke clears. Furthermore, Sabrient’s fundamentals-based SectorCast rankings have been flashing near-term defensive signals. The end result is a long overdue capitulation event that has left no market segment unscathed in its mass carnage. The historically long technical consolidation finally came to the point of having to break one way or the other, and it decided to break hard to the downside, actually testing the lows from last ...



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ValueWalk

Some Hedge Funds "Hedged" During Stock Market Sell Off, Others Not As Risk Focused

By Mark Melin. Originally published at ValueWalk.

With the VIX index jumping 120 percent on a weekly basis, the most in its history, and with the index measuring volatility or "fear" up near 47 percent on the day, one might think professional investors might be concerned. While the sell off did surprise some, certain hedge fund managers have started to dip their toes in the water to buy stocks they have on their accumulation list, while other algorithmic strategies are actually prospering in this volatile but generally consistently trending market.

Stock market sell off surprises some while others were prepared and are hedged prospering

While so...



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Digital Currencies

Bitcoin Battered After "Governance Coup"

Courtesy of ZeroHedge. View original post here.

Naysyers are warning that the recent plunge in Bitcoin prices - from almost $318 at its peak during the Greek crisis, to $221 yesterday - is due to growing power struggle over the future of the cryptocurrency that is dividing its lead developers. On Saturday, a rival version of the current software was released by two bitcoin big guns. As Reuters reports, Bitcoin XT would increase the block size to 8 megabytes enabling more transactions to be processed every second. Those who oppose Bitcoin XT say the bigger block size jeopardizes the vision of a decentralized payments system that bitcoin is built on with some believing ...



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Pharmboy

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. 

Since...



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Promotions

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 jennifersurovy@yahoo.com 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.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

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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