Phil's Newsletter

Monday Market Mayhem – Hillary and the Markets are Exhonerated

What a difference a day makes.

Or a weekend, in ths case as Donald Trump and the GOP went into the weekend thinking they had a chance of winning the White House until, last night, FBI director Comey (the hero of the GOP, the stand-up guy who speaks the truth and isn't afraid to take on the Clintons…) sent ANOTHER letter to Congress but this one was not as helpful as the last (as annotated by @JuddLegum).

Obviously, this morning's post will not be published on Seeking Alpha or many other sites that syndicate my content because it's "political" but, in my defense, to look at the Futures, which are rocketing up 1.5% at 8am, and not think it has something to do with politics is ASININE – it's a complete and utter disservice to your investing readers NOT to discuss politics and it's an even worse disservice to do so while pretending to be objective – which is the editorial policy of most sites.

Image result for trump disaster president cartoonI'm not objective – I think a Trump Presidency would be a disaster as did – obviously – the stock market.  I think the Democratic takeover of this country after the Great Depression not only saved the United States at the time but led to an unprecedented are of relative peace and expansion that was later squandered by more Republicans.  You are free to disagree with me – I'm just letting you know where I stand so you can better understand my point of view on things.  

In that spirit, I shared my take on Hillary's Emails with our Members:

Submitted on 2016/07/07 at 1:30 pm

Email/Rexx – I took it that they were only first initiating those policies and Clinton, of course, has a lot going on with the Foundation and all so it makes sense she wanted to have something other than just her state Department Emails.  I don't think there's anything she did that a reasonable person wouldn't have done – she took plenty of precautions and, as

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Philstockworld November Portfolio Review – BALANCE!


That's up $945,421 (157%) in just under 3 years (11/26/2013) from our original $600,000 allocation on our paired portfolios.  We are, however, down $27,008 (1.7%) from our September high (reviewed 9/30) and that's just fine as our portfolios are about 80% CASH!!! and very defensive into the election uncertainty.  When you make 157% in 3 years, you need to know how to protect it.

We're well ahead of the market, the S&P was at 2,180 on the close of Sept 2nd and Friday we closed at 2,085 so down 95 points is 4.3% and falling at less than 1/2 the rate of the market is all we can hope for when we have so many leveraged positions.  Of course, some of our bigger hedges don't kick in until the market is down more than 5% and, depending on the outcome of Tuesday's election – we may be seeing that and much more.  

Other than our paired Long-Term and Short-Term Portfolios (and the STP is 20% of the LTP and it's main function is to protect our Long-Term positions), our two self-hedging portfolios are doing surprisingly well.  Our $100,000 Options Opportunity Portfolio finished the week at $211,332 and that's up $111,332 (111%) in one year and 3 months since we began it.  In our September 3rd Review, the OOP was at $189,027 so we've gained $22,105 in two months – not bad with hardly any changes.

Finally, our steadiest and oldest portfolio, the Butterfly Portfolio, finished the week at $296,092, up $196,092 from our $100,000 start on 7/29/13.  That's up $8,212 since our 9/3 review and that's exactly what the Butterfly Portfolio is designed to do, grind out a steady income in virtually all market conditions.  

The Butterfly Portfolio is very low-touch, fantastic for retired investors who don't want to watch the market every day – or every week for that matter.  In fact, no new positions were added in the last two months – only adjustments the existing positions, made once a month ahead of option expirations.  

PSW Members can access the full portfolio and positions HERE.

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Non-Farm Friday – Is America Working?

Image result for s&P price earnings ratio 2016Now it's GoPro (GPRO) taking a dive.  

As I noted yesterday, there are a lot of over-hyped, over-valued stocks out there and the more of them that go down in flames, the more people will begin to reflect on the true value of the stocks they are holding and, eventually, the market begins to reprice to a normalized price to earnings ratio which is, sadly, 20% below where we are now.  

Now, I know a lot of guys would make that point their whole article and write 3 or 4 pages on it but I prefer to just put up a simple chart and move on.  You are just one google away from checking the facts – I suggest you do so with me or anyone you read – I'm just assuming you are a smart person who routinely does that, so I try not to belabor my points if I can make them quickly.  That does not mean, however, that they aren't important!  

And keep in mind that's the average p/e ratio – at PSW, we like to buy companies that are better than average, the ones I'm worried about (see yesterday's post) are above the average – especially ones that have p/e's above 50, which means it will take 50 years for the company to make back the money you are paying for a share or 2% per year – WORSE than even the pathetic rate of return on a 30-year note.  Logically, that should be your benchmark for avoiding a company, right?  

Now, the mitigating factor there is growth.  If the company is growing, then you might think it's OK that, at the moment, it may be making 2% but maybe, in the futures, business will double and it will make 4% back on your money and then double again and make 8%.  That's the logic behind investing in Amazon (AMZN), Tesla (TSLA), NetFlix (NFLX), etc but the problem is – companies don't tend to double up very quickly and, if you need 3 doubles just to get to where we like to start (p/e below 15) – you're going to be years and years behind us in value.…
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30% Thursday – Fitbit Shows Us How Ridiculously Overvalued The Market Is

Down 30% in a day?

That's right, Fitbit (FIT) just fell from $12 to $9, dropping $1Bn in market cap overnight as they missed revenues ($503.8M) by $3.13M (0.6%%) and guide their Q4 projections 25% lower than expectations.  This isn't about FIT in particular, they are just the most recent disappointment this earnings season – this is about how a well-followed company, with 21 analysts on their case, who had an AVERAGE price target of $20.88, can fall from $30 to below $10 (66.6%) in a single year.

This is more an indictment of a market that is unrealistically priced than it is of just FIT.  I keep telling our Members not to mess around with companies that have dot-com level valuations of 100x or more of their earnings and FIT isn't even one of those, they will probably end up earning just under 0.80 for each of those now $9 shares – the reaction is simply an indication of how hollow the support is for any of these stocks – now that the smart money base has been removed – leaving only the sheeple and their tendency to stampede in overvalued positions that will SHOCK them at earnings. 

FIT's particular miss is due to a manufacturing issue that is already being fixed, the reaction is an over-reaction but only NOW, -66.6% after the year started, is FIT trading at a realistic price.  Facebook (FB) is down nearly 5% at the open, despite putting up $7Bn in Revenues, which is up 55% from last year and $2.4Bn in Earnings, which is up 166% from last year.  On the bottom line, FB made 0.82 per $127 share ($121 now) so call it about $4 for the year and that's a p/e in the 30s which is RIDICULUS – even with that kind of growth.  

This is exactly what happens when you reach the top of a rally and you have consistently refused to invest in fundamentally secure companies (ones that return at least 5% of your investment annually) – unless they are growing at incredible rates, the slightest misstep can spook your fellow investors because the value investors (smart money) have long ago pulled their support and it's just you dreamers propping up the prices –…
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Will We Hold It Wednesday – Dow 18,000 Edition

You're welcome!  

That's right, if you read our PSW Morning Report yesterday, at 8:04 am I said:  

The big excitement last night was another gasoline (/RB) pipeline explosion in Alabama, which sent prices flying more than 10% higher overnight and now around $1.55 from $1.41 yesterday.  We shorted it this morning in our Live Member Chat Room at about $1.575 so we'll see how it goes – clearly the move is overdone but those are our favorite kind of moves to bet against!  

Latecomers (in Live Member Chat we shorted much earlier for better prices) were fortunate it was a slow grind down and we bounced just under the $1.55 line until 11 and then the bottom fell out hard and fast and, by 12:15, we were below our goal of $1.475 (as our original short was $1.575 and we were hoping for a 10-cent drop) on contracts that pay $420 per penny, per contract!  

Futures are a really fun way to put some of that sideline cash to work and an entertaining way to day-trade the markets while you wait for your responsible, long-term positions to mature.  This morning, also in our Live Member Chat Room, we went long on Natural Gas (/NG) as it tested the $2.80 line and we'll likely initiate a long on the ETF (UNG) today during our Live Trading Webinar (1pm) – possibly the last one before the Trumpocalypse. 

11-1-2016 7-14-04 PM SPY DAILY1Speaking of market turmoil in fear of insane electoral choices being made – we added another hedge yesterday to our Short-Term Portfolio because it hasn't stress-tested well enough this week to make us comfortable against a sharp correction – which is a mounting possibility.  

As you can see from Dave Fry's S&P ETF (SPY) chart, we've broken significant support as we retest the September lows.  If we quickly reverse back over the line TODAY, then it will be no more significant than the mid-October panic was but, if we finish the day below the line – DOOM!!!  And you need to take my DOOM!!! calls seriously – just last Tuesday, I…
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Trumpy Tuesday – The Turmoil Continues

Image result for trump hillary cartoonBall of confusion.  

That's what we have going on this week and let's not forget the Fed does have a rate decision tomorrow at 2pm but, of course, NO ONE thinks they'll raise rates 6 days before the election but Hell, no one thought the FBI would send out a letter about POSSIBLY more Clinton Emails 11 days before the election and THAT happened – so here we are, with just 6 days to go – actually facing the POSSIBILITY (not probability) that Donald Trump may be the next President of the United States.  

I'm going to pretend I have no opinion as to whether that's a good or bad thing because, clearly, almost half of you actually think that's a good thing – so who am I to stand in the way of putting the 156th richest person in the country in charge of your life, with the mandate to shape the Future of your children with probably 4 Supreme Court picks ahead of him?  Of course he's got your best interests in mind!  After all, when has he ever failed to do what's best for the little guy?  Forbes says he's worth $3.5Bn and Trump said $10Bn as LITERALLY the first thing he told you in the campaign was a lie.  Clearly he's not a guy that would ever lie or exaggerate.  

Even if you have $10M, Trump is 350x richer than you are.  That's how much richer the average CEO is than the average employee so don't think you are in his "club" – you're not even likely to be the waiter at his club.  Like George Carlin says, it's a big club – and you ain't in it – it's also the club they like to beat you over the head with!  

Trump is simply doing in politics what he has always done in business – he's cutting out the middle man!  Why buy politicians (something Trump claims to be good at) when you can get other people to give you money so you can buy the whole election and then you ARE the politician who gets to be bought.  Look how rich the…
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Monday Market Movement – T(rump) Minus 8 Days?

Image result for trump lock her upWhat a difference a weekend makes.

We're back to talking about Hillary's Emails and there's now no chance of this election being decided on issues (what issues?) as we head into the home stretch.  The markets don't like uncertainty but it's the last day of the month so expect us to be propped up for at least a day but it would be crazy to call any direction into next week, with all 4 branches of Government (courts too) up for grabs in what is likely to be the most important election of the Century as far as setting direction for this country.

We're having a pool to see which American city will have the first riot.  We haven't had a good election riot since 1855 when the Democrats in Louisville went at it with the Know-Nothing Party and no, I'm not insulting Republicans – that's actually what they used to be called (at least they've never broken with that spirit!).  And what was the core principle of the Know-Nothings?  Well they were anti-immigration, of course, and they attacked German and Irish Catholic neighborhoods, leaving 22 dead and hundreds injured in what came to be called Bloody Monday.  

According to the Louisville Daily Journal by Monday morning the city was "…in possession of an armed mob, the base passions of which were infuriated to the highest pitch by the incendiary appeals of the newspaper organ and the popular leaders of the Know Nothing party." [3] The Know-Nothings formed armed groups to guard the polls on election day. Hundreds were deterred from voting by direct acts of intimidation, others through fear of consequences. In the Sixth Ward William Thomasson, a former Congressman from the district, while appealing to the maddened crowd to cease their acts of disorder and violence was struck from behind and beaten.

 After dusk, a row of frame houses on Main street between Tenth and Eleventh, the property of Mr. Quinn, a well known Irishman, were set on fire. The flames extended across the street and twelve buildings were destroyed. These houses were chiefly tenanted by Irish, and upon any of the tenants venturing out to escape the flames, they were immediately shot down.

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Thank GDP It’s Friday!

Can one report pull us out of a slump?

As you can see on the S&P 500 chart, we've gone nowhere since early September, which is where we landed after going nowhere all summer and then dropping a quick 2.5% on the Brexit, from which we recovered quickly before grinding back down to the exact same spot – so I guess that was the right reaction after all.

In between we've hear all sorts of amazing BS as "analysts" try to explain the up and down gyrations of the market and we've heard just as many prediction about where the market was going and, despite the fact that 90% of those people were wrong, most of you are still looking to see where those same idiots think the market is going next.  Why?  Really, why?  I just don't get it.

Back on September 1st I asked: "Are you the dumb money?", noting that the "smart money" was getting out of equities at a rapid rate – even as we were making new highs.   That was the day after I warned about: "Window Dressing Wednesday – End of Month Market Prop Job" and, by the way, there's a great chance to get into that UNG play at the same prices they were back then – still a great trade!  

On August 23rd, I wrote: "Technical Tuesday – 2,200 or Bust!" and the market topped out the next day at 2,193.81 and we are 2.7% below that mark this morning at 2,133.04 – no "bust" yet, just a minor correction.  Oddly enough, we did have a lot of bullish picks in that post and most of them are still playable.  

On Sept 12th, I wrote: " Monday Market Movement – Hedging for Disaster" and laid out the following hedge with the S&P at 2,160 and the Russell at 1,235:

  • Buy 50 (more) TZA Jan $30 calls for $3.15 ($15,750) 

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Thrilling Thursday – Back to our Bounce Lines (Again)

I don't know what people are so excited about?

During our Live Trading Webinar yesterday, we called a long on the Russell Futures (/TF) and nailed the bottom at 1,200 with a target of 1,203, paying $300 per contract.  We quickly made that money but then there was another chance at 8pm and another at 4am and another at 5am and now the Russell is up at 1,206 with $1,500 worth of gains just from making the same trade over and over and over again.  

If you are going to be a day trader – learning to identify channels is the most important thing you can do.  We had similar success with our S&P longs (/ES) off the 2,125 line and we just passed our strong bounce line at 2,140 this morning – which is a good place to cash out with a $750 per contract gain on those (see yesterday's post for bounce lines).  

As we're flashing more green this morning, we're not looking to go short unless we get signals to do so.  You can see what the Labor Market Conditions Index looks like (yuch!) and we have Durable goods at 8:30, Consumer Comfort at 9:45, Pending Home Sales at 10 and the Kansas City Fed Report at 11 – so plenty of data to chew on along with about 200 earnings reports.  I see a lot of reds in those reports but the markets are in the mood to rally – so get out of their way for now.  

How fragile is this recovery?  Well, here's one of those WikiLeak Emails from the new head of the DNC to John Podesta about the mood of the American people:

Here's some quick charts from Harvard via ZeroHedge that illustrate the state of our economy:

You get the picture, but it's a picture that doesn't match the markets, which are still skating along at their all-time highs.  Why is it that Apple (AAPL) can have great earnings and great revenues and
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Which Way Wednesday – Helter Skelter – Again

Image result for helter skelter

"When I get to the bottom I go back to the top of the slide

Where I stop and I turn and I go for a ride

Till I get to the bottom and I see you again" 

If you think you have deja vu, you are right.  The title of our Wednesday post two weeks ago was "Wednesday Weakness: Controlled Descent or Helter Skelter?" and we predicted the recent movement, saying:

Just as the path of the Helter Skelter is predictable, so is the eventual unwinding of a market rally and, no matter how much QE you pump into it, things do come down eventually.  Only when you build on the base are you able to raise the bottom of the slide.  Otherwise, no matter how high you climb – you will see that bottom again.  

And so, exactly two weeks later, we are back to the bottom of the slide and just as likely to go back to the top where we'll stop and we'll turn and we'll go for another ride until we get to the bottom and we do it again – yeah, yeah, yeah!  

There's nothing wrong with a repetitive market pattern, we're doing fantastically well getting in and out of futures plays and, as I noted that Wednesday, there are plenty of stocks we do like and we're doing plenty of bottom-fishing along the way because, while we're looking for a market correction in the short-term, in the long run we're pretty bullish.  Meanwhile, we're simply looking for the same Futures bounce lines we outlined at the time to confirm a real recovery:

  • Dow (/YM) 18,075 (weak) and 18,150 (strong)

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Charlie Munger's Parody

By VW Staff. Originally published at ValueWalk.

Notes from Charlie Munger’s annual meeting at the Daily Journal are making the rounds. This parody, from a few years back, was too good not to share again. “One thing about doing something dumb is that you’re unlikely to do it again.”

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Charlie Munger's Parody


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Financial Markets and Economy

Oil Slips From 19-Month High as Ample Supply Offsets OPEC Cuts (Bloomberg)

Oil retreated from the highest close since July 2015 in New York as record U.S. crude inventories offset OPEC production curbs.

Sales of New U.S. Homes in January Were Slower Than Forecast (Bloomberg)

Purchases of new U.S. homes in January were slower than forecast, signaling an increase in mortgage rates may be giving some potential buyers pause.


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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Stocks across Europe dived into the weekend (Business Insider)

Stocks all over Europe dived Friday, as markets took a cautious approach and investors took profit after US stocks hit record highs Thursday evening.

Trump Is on the Verge of His Own Bull Market (Bloomberg)

Consecutive gains in the Dow Jones Industrial Average have left it at the doorstep of history, including a 20 percent surge in futures from the early hours of Nov. 9 that could be loosely framed as the president’s own bull market.


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Zero Hedge

Size Matters: Visualizing The Tallest Building In Each State

Courtesy of ZeroHedge. View original post here.

The United States has some of the world’s tallest skyscrapers, but their distribution is extremely uneven. Today’s infographic comes from, and it covers the tallest building in each state.

As Visual Capitalist's Jeff Desjardins explains, New York City alone has 6,229 highrises – more than the next nine cities combined, including Chicago, Los Angeles, Honolulu, San Francisco,...

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Digital Currencies

As Bitcoin Surges To Record High, China Prepares Its Own Digital Currency

Courtesy of Mike Shedlock (Mish)

Bitcoin hit an all-time high over $1200 today.

Traders are happy because the SEC is expected to rule on a Bitcoin ETF by March 11.

Meanwhile, Bloomberg reports China Is Developing its Own Digital Currency.

After assembling a research team in 2014, the People’s Bank of China has done trial runs of its prototype cryptocurrency. That’s taking it a step closer to becoming one of the first major central...

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Kimble Charting Solutions

Crude Oil; Energy stocks suggesting its about to fall, says Joe Friday

Courtesy of Chris Kimble.

Below takes a look at the price action of Crude Oil, Energy ETF (XLE) and Oil & Gas Exploration ETF (XOP) over the past three years.

Could Energy stocks be suggesting the next big move in Crude Oil again? Which direction are they suggesting?


At this time the intermediate trend in Cru...

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Chart School

Good Recovery

Courtesy of Declan.

In early morning action it was a clear swing to sellers after yesterday's non-event. However, buyers came back and were able to make a good chunk of these losses into today's close.

Large Caps remained the most attractive as defensive stocks often are during times of doubt. The S&P registered higher volume accumulation as intraday action proved to be relatively tight.

The Nasdaq suffered larger losses, but there was no distribution to go with it. Technicals were relatively immune to today's action.


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Members' Corner

People With Cats Will Understand?

Courtesy of Nattering Naybob

Taking a "potty break" from "in the Toilet Thursday" or "Thursday's in the Loo."

This week's subject is self evident, starring two lovable felines Cole and Marmalade in, People With Cat's Will Understand.


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Swing trading portfolio - week of February 20th, 2017

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


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Mapping The Market

NSA May Be Withholding Intel from President Trump

By Jean Luc

These GOP guys were so worried about Hillary's email server and now we find out that we had something close to a Russian mole in the White House. In the meantime, Trump keeps on using his unsecured phone, had high level conversation in his resort in front of dinner guests! It's getting so bad that rumors are now circulating that the NSA is not sharing information with the WH:

NSA May Be Withholding Intel from President Trump


….Our spies have had enough of these shady Russian connections—and they are starting to push back….In light of this, and out of worries about the White House’s ability to keep secrets, some of our spy agencies have begun withholding intelligence fro...

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Phil's Stock World's Las Vegas Conference!

Learn option strategies and how to be the house and not the gambler. That's especially apropos since we'll be in Vegas....

Join us for the Phil's Stock World's Conference in Las Vegas!

Date:  Sunday, Feb 12, 2017 and Monday Feb 13, 2017            

Beginning Time:  9:30 to 10:00 am Sunday morning

Location: Caesars Palace in Las Vegas


Caesars has offered us rooms for $189 on Saturday night and $129 for Sunday night but rooms are limited at that price.

So, if you are planning on being in Vegas (Highly Recommended!), please sign up as soon as possible by sending...

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The Medicines Company: Insider Buying

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

I'm seeing huge insider buying in the biotech company The Medicines Company (MDCO). The price has already moved up around 7%, but these buys are significant, in the millions of dollars range. ~ Ilene




Insider transaction table and buying vs. selling graphic above from

Chart below from


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All About Trends

Mid-Day Update

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

Click here for the full report.

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

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FeedTheBull - Top Stock market and Finance Sites

About Phil:

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

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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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