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Phil's Newsletter

Fallout Friday – Global Concerns Rock US Markets

8-6-2014 9-16-39 PM IWMIraq, Ukraine, Ebola

PLENTY of things to worry about and we've ONLY corrected 10 points (7.5%) on the Russell – exactly what we predicted under our fabulous 5% Rule™!  None of the other major indexes have fallen as far, so we continue to watch that line very closely for support.  

This morning we played the S&P (/ES Futures) bullish in our Live Member Chat Room (you can join us here) off the 1,900 line and were rewarded with a quick 10-point gain (+$500 per contract) already (7:45) as our assessment of the Global situation (that it's not all that bad) seems to be playing out with Russia making a few conciliatory noises over in Ukraine though, of course, any good game of brinksmanship involves a bit of give and take – so it ain't over until it's over. 

As you can see from our Big Chart, we're still down 3 of 5 Must Hold lines and, when the Must Hold lines don't hold – we stay bearish!  Not too bearish, mind you, we've pretty much shifted to neutral in our Member Portfolios and our Long-Term Portfolio closed the day at $587,490 (up 17.5% for the year) while our Short-Term Porfolio finished at $132,314 (up 32.3% for the year) for a combined $720K up $1,000 for the week and down $4K on the day as we added more BULLISH positions (bottom fishing) into the weekend. 

8-6-2014 9-15-06 PM IYTWe'll quickly abandon our hopes for a bounce if the Dow fails to hold it's 200 dma at 16,343 and we're keeping an eye on the Transports, where IYT is testing it's 100 dma at 142, which Scott Murray's chart shows us has held firm for two years now.  

Having well-balanced portfolios let's us quickly pivot to take advantage of changing conditions and this is an inflection point, so we have bullish and bearish trades ready to trigger – depending on how these lines play out.  

While we're waiting, we have tons of fun with our Futures Trading.  In yesterday's moring post, I mentioned that we were going short on /TF (Russell Futures) at…
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Huge Victory for the GOP – Bottom 90% Completely F’d!

Victory in our time!  

They said it couldn't be done, they said that people in a "Democracy" would never allow it to happen but, in the past 5 years we have actually taken 15% of the income AWAY from the bottom 90% of American wage-earners and re-distributed it to the top 10% and, since there are much less of them, it has boosted our top 10% incomes by 115% over the same period!  

In the words of the great Winston Churchill (as redefined by the Conservative Bible): "Never was so much taken from so many for so few."  As you can see from the chart above, the Reagan Revolution successfully reversed years of gains for the average American and began shoveling all of the economic progresss to the top 10% for the last 30 years but only in the last 5 has this policy gone into overdrive as we have begun to actively TAKE the money from the bottom 90%,  Look how rich that makes us – no wonder we are all voting to keep this policy going!  

As noted by Zero Hedge:

"Inequality in the U.S. today is near its historical highs, largely because the Federal Reserve’s policies have succeeded in achieving their aim: namely, higher asset prices (especially the prices of stocks, bonds and high-end real estate), which are generally owned by taxpayers in the upper-income brackets.

The Fed is doing all the work, because the President’s policies are growth-suppressive. In the absence of the Fed’s money printing and ZIRP, the economy would either be softer or actually in a new recession."

It's not just our Fed, of course, this morning we are getting more doveish noises from the ECB press conference as Draghi promises MORE FREE MONEY (for those of us with the credit scores or balance sheets to qualify) and that is already (8:30) pushing our Futures up half a point in pre-market trading.  We're still watching our bounce levels (and shorting /TF at 1,130), as there
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Wednesday Worries – Putin Puts Pressure on Ukraine

 photo putin_zps43535164.gifNow what?  

Well, same old, same old really.  As the US and Europe ratchet up the sanctions, Putin has ordered "retaliatory measures" of an unspecified nature and has massed more troops along the Ukraine boarder:

"Political tools of economic pressure are unacceptable, they contradict all norms and rules," he said. "In that connection, the government of Russia has already proposed a series of retaliatory measures against the so-called sanctions of certain countries. I think that in current conditions, with the goal of protecting the interests of domestic producers, we could certainly think about that." he added.

SPY 5 MINUTEIn recent days, Russian regulators have banned shipments of some European fruits and vegetables and raised questions about the safety of products from MCD in Russia, threatening to ban their sale. Officials deny any political motivation for those moves.  wink  

Russia's Vedomosti newspaper reported Tuesday that the government was considering a partial or total ban on overflights of Siberia by European airlines, which use the route to shorten trips from Europe to Asia.  

European markets are already suffering with Italy dropping 2.9% this morning on news that it has officially slipped back into a Recession with GDP falling 0.2% in Q2 – a far cry from the +0.2% predicted by leading economorons.  The IMF has cut their optimistic growth estimate for Italy to 0.3% in 2014 and dropped Spain to 1.3%.  Spanish markets are down 2% today as well.  

We decided this was a good time to buy this morning and, at 6:58 this morning, I put up this chart for Members in our Live Chat Room, saying:

Check this out – all hitting the S1 lines so far:

It's certainly worth playing for a small bounce at


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Technical Tuesday – Weak Bounce Sucks in the Suckers Once Again

Screen Shot 2014-08-04 at 8.59.13 AMWhen will they ever learn? 

Actually it's a rule of thumb at PSW that dip buyers need to get burned 3 times before they wise up to a proper correction, so they still have at least another try in them before they finally walk away from this crazy market.  As you can see from Oppenheimer's S&P chart, 56% of the S&P has plunged back below their 50 dma in the past 30 days.

This is EXACTLY what I've been warning you about.  At the same time the indexes LOOKED like they were rallying, MOST stocks were actually being dumped while a few (AAPL, for expample) were kept aloft to maintain the ILLUSION that the market was still strong.  That's how they keep the retail buyers moving in while the institutional investors head for the hills.  Yesterday's action was nothing but another low-volume bounce – the kind we teach our Members to ignore:

AlphaCapture

Short-term, we're certainly oversold but we'll be very critical of a low-volume recovery until we see those 50 dmas retaken on the indexes.  Those are way up at 16,877 on the Dow, 1,954 on the S&P, 4,368 on the Nasdaq, 10,912 on the NYSE and 1,160 on the Russell.  Anything less than that and there's nothing to be particularly bullish about. 

That doesn't stop us, of course, from picking individual short-term longs.  On Wednesday, for example, I was on TV on Money Talk and we featured this play on GTAT as my "Options Play of the Month."  Last night, GTAT knocked it out of the park on earnings and the stock shot up over 10% to $15+ already in pre-market trading.  That will put us well on track to the full $14,000 return on this spread and a 1,650% gain on cash ($13,200 profit on the $800 we invested)!  Not bad for a few day's work, right?  

By the way, if you never want to miss trade ideas like GTAT again – sign up right here for Membership and you will be among the first to hear about our new trade ideas every day!

We're still running our SQQQ hedge as we didn't think yesterday's…
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Monday Market Mayhem – Bouncing Back or Pausing for the Next Drop?

Wheeeeee, what a ride!  

As you can see from our Big Chart, we took a dive with some conviction last week, giving up all of June AND July's gains in just a few days.  Just like a roller coaster – it takes a long ride to get to the top but then it's a really quick ride back down as gravity takes it's toll.

This is why I urged people to hedge to the downside and get to more CASH!!! on TV last Wednesday as our expectations were (and are) for a 5-10% correction.  The SQQQ Dec $40/50 bull call spread we suggested at $2.25 have already popped 20% to $2.71 on that little 1.5% drop in the Nasdaq, which is a perfect hedge as we like to get 10 times the drop on our insurance plays.  With the offsetting LULU puts (see broadcast), the net $400 credit now pays another $400 for a 200% gain on each unit of the spread – an excellent hedge overall and still another potential $19,600 to be made if the Nasadq keeps falling this year and, if not – then we didn't need the hedge! 

As is often the case with Monday's, we're not going to be reading much into the action today, especially if the volume is light after last week's heavy selling volume poured in.  As you can see from the above chart from KimbleChartingSolutions, we may still need the next 4,900% of upside potential on our SQQQ hedges to combat a potential downtrend in the markets.  

As you can see from these views on the Russell and Mid-Caps, we're experiencing a technical breakdown that hasn't occurred in  many years and maybe it's telling us something of maybe it isn't but, as we were discussing in Member Chat over the weekend (per Jeff Mackie):

“… This isn't a time for over thinking. It's a time for taking a measure of your emotions. If you're scared now you'll be more frightened later. Control your risk. If you didn't sleep last night you're too long stocks. If you're afraid of your statements it's because a little


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TGIF – Stop the Market, We Want to Get Off!

Wheeeeeeeeeeeeeeeee!  

What fun this is!  Well, it's fun for us because we were playing for this drop and not only did our bearish Short-Term Portfolio pop 10% yesterday but our bullish Long-Term Portfolio crossed over the 20% line for the first time this year.  How is that possible?  Because we are using our "Be the House – Not the Gambler" strategy to SELL premium to suckers who think they know what the market is going to do!

This allows us to make money in any market direction while remaining well-hedged for the downturns. It also allows us to put up these spectacular gains while using less than 50% of our cash – keeping it on the sidelines and ready to deploy when we catch a good bargain on one of our Buy Lists to add to our virtual portfolios.  We had not one but two special Live Trading Webinars yesterday for our Members, where we cashed out the XOM puts I mentioned FOR FREE last Friday for a 300% gain.  

If you want to get our morning posts delivered to you each day, in progress, at 8:30 each day with access to the full posts pre-market – just sign up right here.  

Last Friday I also suggested our SCO (ultra-short oil) longs and that $1,200 position in our Short-Term Portfolio closed yesterday at $3,400 – up a very nice 183% and the SQQQ trade I aslo put up in last Friday's morning post for a net $400 credit (also featured on TV on this Wednesday's Money Show) finished yesterday's session at $1,060 – up $1,400 (350%) in less than a week!   

Another hedge we discussed were the TZA Aug $14 calls which were $1.67 on Wednesday (more FREE picks in the morning post), which was already up 153% from 0.66 when I first mentioned them (outside of our Live Member Chat Room) in our July 8th post.  As of yesterday's close, they were $2.51 – up 50% from Wednesday and up 280% overall.

The 20 calls we picked as a hedge on July 8th for $1,320, jumped to…
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Flip Flopin’ Thursday – Argentina Makes Us All Cry

I warned you about Argentina! 

We discussed them way back in December as they faked their own GDP data, that it was nothing more than window-dressing to keep them from LOOKING like they were in default – even though they were clearly heading that way.  

So it should come as no surprise that, as the deadline finally comes, there is no surprising rescue for the World's 26th largest economy ($477Bn vs $499Bn for Norway, $394Bn for Austria, $385Bn for Thailand and $248Bn for Greece).  Since it's not a surprise, we took the opportunity this morning to go long in the Futures, as the 1% dip around 4am seemed overdone.  I sent out a special Alert to all of our Members, saying:

Still, I like /TF for a bullish over the 1,130 line (testing now) and /YM at 16,700 and /ES 1,950 for bounces but VERY TIGHT STOPS if any of them fail.

NDX WEEKLYFortunately, they did not fail and already (8am) we have /TF 1,135 (up $500 per contract), /YM 16,732 (up $160 per contract) and /ES 1,955 (up $250 per contract) and our Egg McMuffins are paid for and those trades are now off the table (tight stops at least), as we expect more selling at the open!  

It's nice to play the Futures to offset bearish bets, like the SQQQ (ultra-short Nasdaq) trade we discussed in yesterday's morning post and the QQQ weekly $96 puts we added for .22 in yesterday's live Member Chat ahead of the Fed – as we expected the statement would disappoint.  Those should come out well this morning and going long on the Futures locks in those potential gains for us.  

Now, getting back to Argentina, ARGT is UP 32% this year and that is just silly so ARGT makes a nice short at $23.20 and you can, in fact, buy the Oct $23 puts for $1.45 and, if they give back that 32%, they'll be back to $19 and you'll have $4+ for a $2.55 gain (175%) – that's a fun way to play it.  

I discussed other ways to play the market yesterday on Money Talk,
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Whipsaw Wednesday – GDP and the Fed, Oh My!

SPY 5 MINUTEYesterday went as expected.

As I told you in the morning post, the "rally" was nothing more than a prop job to allow a full day of selling right into the close.  Now that the markets are closed, the S&P is being propped back up – 0.3% as of 7:30 am.  May the farce be with you! 

Of course, this morning, there may actually be something to get excited about as the 2nd Quarter GDP Report will come out at 8:30 and economorons are expecting a full reversal of Q1s 2.9% dive with a 2.9% gain forecast for Q2.  

I don't know what numbers they are looking at (assuming they even bother – from their usual performance, they would be better off using darts) but I'm not seeing a big resurgance in Consumer Spending, which is 70% of the US economy.  I don't see how our Trade numbers improved, although we did import less oil (to create artificial shortages and drive up prices for the consumers).  

Business Investment seems to be up a bit and Inventories are a real wild card where a build will be a huge plus – even though, to me, it sort of indicates they are not selling anything and it's piling up on the shelf.  

This is the fantasy chart for the GDP that is making the rounds this morning.  Notice it's from the Commerce Department (aka MiniTru) and, like our Chinese Masters – they are able to make those numbers dance when they want to and, believe me, they REALLY WANT TO this Q as two down quarters in a row = the "R" word.  

So we'll see if the GDP can get the rally back on track and, if not, it will be up to the Fed this afternoon (2pm) to pump up the jam and get the party going again with their statement.  It's very possible the Fed timed their announcement on the afternoon of the GDP release BECAUSE they know they'll have to make a save in the afternoon.  Also, it's no coincidence that Treasury is pushing $44Bn of 2-year and 7-year notes between GDP and the Fed – just in time to…
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Tricky Tuesday – Low Volume Rallies Continue to Fool Us

SPY 5 MINUTESome of the people all of the time

That's the basis for this rally – or what's left of it – as we see this pattern almost daily:  A big(comparatively) volume sell-off followed by a "rally" on 1/3 to 1/4 of the volume that sold and then, once we hit a pre-programmed peak (about where we got to in the no-volume Futures), we have a bit of volume selling into the close.  

This is how you can see those charts that show all the "smart money" running out of the market, even as the market goes higher.  Why would they leave?  Why would anyone leave this exciting market?  The answer is, because those fund managers are well aware that, at some point, the music will stop and there will be no buyers to save them then.  Best to get out now and avoid the rush.  

That time was also "different," wasn't it?  We had invented the Internet (well, Al Gore did) and easy monetary policy led to bank mergers and NAFTA ushered in an era of free trade that send tens of millions of jobs overseas, causing profits for US Corporations to soar and those good times were never going to end – until they did.  

SPX WEEKLYIt's very hard to say when a rally like this will finally run out of gas but, when we stop making new highs and we have these BS daily, manipulative run-ups to cover the selling – that's probably a good time to get more cautious.  

As noted on Dave Fry's S&P chart, it's ALL about the Fed and how much FREE MONEY the Fed will pump in and how long they will keep pumping it in, etc.  You would think we'd be tired of the same old song and dance but why should we, when we GET PAID to join in?  

Yesterday, for example, in our Live Member Chat Room, I called for a bottom on the Russell Futures (/TF), saying:

/TF below 1,130!   One would hope that's it.  Playable for a bounce over that line


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Manic Monday – Shanghai Surprise

FXI WEEKLYShanghai popped 2.5% this morning

The index flew back to it's highest level since Dec 16th as official Chinese data (ie questionable, at best) showed profits at China's largest Industrial Firms rose 17.9% in June from "just" 8.9% in May.  

Despite the "stellar performance" of large-cap companies, the main reason the market is flying is because of a general consensus that Beijing may soon allow the banks to bring in more private of foreign strategic investors.  Industrial and Commmercial Bank kicked the ball off by announcing a plan to raise $12.9Bn through the sale of preferred shares.  

It's hard to reconcile this "good" news with the fact of the Baltic Dry Index (bulk shipping of raw materials) dropping back to 3-year lows in early July.  Who then, is China selling to?  Even the WSJ notes that major steel foundries like Tianjin have turned off their smelters – indicating a tremendous pullback in construction activity.  

How is China achieving 7.5% growth if it is powering down steel plants and letting copper stockpiles build up?  With debt.  Despite official instructions to banks to curtail lending to overstretched developers and municipalities, loans are still increasing at rates twice as fast as the economy—and those numbers exclude a so-called shadow-banking lending system estimated at more than $5 trillion, or 80% of gross domestic product.

A big question is what happens to bad debts when the treadmill comes to a halt?  Despite rhetoric about opening up the financial system to market pressures, there is clearly reluctance in Beijing to let lenders suffer losses.  On Wednesday, for example, construction company Huatong Road & Bridge Co. somehow found the funds to make a bond payment that it had earlier warned it would miss.

SPX WEEKLYPerhaps this is why the global reaction to the blazing Shanghai market is subdued at best.  As you can see from the above chart, the Chinese market has been flying on this sort of "enthusiasm" since the start of Q2 but, as was made obvious last week, the other Global Markets are running out of steam.

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Phil's Favorites

"Regin" World's Most Advanced Cyber Snoop Hits Russia, 4 Other Countries; Western Intelligence Agency Likely Responsible

Courtesy of Mish.

Telecom companies in Russia and Saudi Arabia have been hit by the world's most sophisticated hacking software to date.

Symantec believes a Western intelligence agency is responsible.

Please consider World’s Most Advanced Hacking Spyware Let Loose
A cyber snooping operation reminiscent of the Stuxnet worm and billed as the world’s most sophisticated computer malware is targeting Russian and Saudi Arabian telecoms companies.

Cyber security company Symantec said the malware, called “Regin”, is probably run by a western intelligence agency and in some respects is more advanced in engineering terms than Stuxnet, which was developed by US and Israel government hackers in 20...



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Zero Hedge

Your Role In The World Explained (In 1 Simple Sketch)

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Presented without comment...

 

 

h/t @therealbanksy

...

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Chart School

Overreaching Enthusiasm?

Courtesy of Declan.

Bullish monetary policy rumblings from China and Europe had kick started a bright opening for markets, but the feel good factor gradually wore off as the day lengthened, and in the end, the day felt oddly bearish. The S&P closed with a bearish inverse hammer, which could turn into a bearish shooting star if there is a gap down on Monday. Volume climbed to register technical accumulation, but this could mark significant overhead supply if sellers come back tomorrow. I have widened the Fib levels for the next decline. Note, pending MACD trigger 'sell,' although other technicals are in good shape.


The Nasdaq did alright as it emerged from a secondary handle. The 'b...

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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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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the Happy Thanksgiving Edition of Stock World Weekly!

Click on this link and sign in with your PSW user name and password. 

Picture via Pixabay.

...

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Market Shadows

Official Moves in the Market Shadows' Virtual Portfolio

By Ilene 

I officially bought 250 shares of EZCH at $18.76 and sold 300 shares of IGT at $17.09 in Market Shadows' Virtual Portfolio yesterday (Fri. 11-21).

Click here for Thursday's post where I was thinking about buying EZCH. After further reading, I decided to add it to the virtual portfolio and to sell IGT and several other stocks, which we'll be saying goodbye to next week.

Notes

1. th...



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OpTrader

Swing trading portfolio - week of November 17th, 2014

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: Investors make up new rules for their new market paradigm

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

Courtesy of Sabrient Systems and Gradient Analytics

By Scott Martindale

Investors in U.S. equities seem to have embraced a new market paradigm in which upside spikes come more swiftly than the downside selloffs. Remember when it used to be the other way around? When fear was stronger than greed? The market is consolidating its gains off the early-October V-bottom reversal, and no one seems to be in any hurry to unload shares this time around, with the holidays rapidly approaching and all. After all, there are bright blue skies directly overhead giving hope and respite from the early freeze blanketing the country.

In this weekly update, I give my view of the current market environment, offer...



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Digital Currencies

Ukraine Central Bank Bans Bitcoin "To Protect Citizens" From Financing Terrorism

If you would have supposed that Ukraine had enough problems to make banning bitcoins a backburner issue, you'd have been wrong. The rationale, "to protect consumers' rights" makes little to no sense... The other one, "to keep money in the country" makes more sense. 

Ukraine Central Bank Bans Bitcoin "To Protect Citizens" From Financing Terrorism

Courtesy of ZeroHedge. View original post here.

The Hryvnia has collapsed to new record lows near 15/USD this morning. The Central Bank and bankers "agreed to keep UAH at 15-16/USD" but are &qu...



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Option Review

Yamana Gold call options sink

Yamana Gold call options sink

By Andrew Wilkinson at Interactive Brokers

A four-year low for the spot price of gold has had a devastating impact on Yamana Gold (Ticker: AUY), with shares in the name down at the lowest price in six years. Some option traders were especially keen to sell premium and appear to see few signs of a lasting rebound within the next five months. The price of gold suffered again Wednesday as the dollar strengthened and stock prices advanced. The post price of gold fell to $1145 adding further pain to share prices of gold miners. Shares in Yamana Gold tumbled to $3.62 and the lowest price since 2008 as call option sellers used the April expiration contract to write premium at the $5.00 strike. That strike is now 38% above the price of the stock. Premium writers took in around 16-cents per contract o...



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Pharmboy

Biotechs & Bubbles

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

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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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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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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