Phil's Newsletter

Tempting Tuesday – Declining Dollar Masks Market Decline

Do you have cash?

If so and if that cash is in Dollars, your cash lost 1.5% of it's value since Friday – unless, of course, you used those Dollars to buy stocks, which only gained 1/10th of 1% since Friday's open, so you can still trade your declining Dollars for US stocks at the same prices they were Friday.  The question is which one, if any, will hold their value better going forward.

Hammering the Dollar today is an unusual call for radical policy action from the San Fran Fed's John Williams (who also composed the theme for Star Wars) who is warning that our Empire is being threatened by factors beyond the Fed's control like an aging population and sluggish productivity gains which are braking growth. 

That, in turn, is keeping interest rates from rising as far or as fast as in the past; Williams on Monday estimated U.S. short-term rates would likely rise only to 3% or 3.5%, even after the economy regains full health, and perhaps not even that.

Williams floated two monetary policy changes to cope with lower rates: raising the Fed's current 2% inflation goal, or replacing its current inflation-targeting regime with some form of nominal GDP targeting. Both approaches, he said, would give the Fed more scope to lower interest rates in response to downturns. 

In other words, policy changes that will keep us in this QE cycle for A LOT longer than is currently expected.  

That's why yesterday, on the day we set an all-time high on the S&P 500, the volume was the lowest level of the year, coming in at just 48.6M on the ETF (SPY), 20% below the previous day and barely more than 1/10th of the volume we dropped on in late June.  That's right, the entirety of yesterday's SPY volume wouldn't even cover a single hour of selling on a down day – house of cards, indeed! 

During this whole rally, the volume has been heading lower and lower, even as the index has headed higher and higher and the last time volume was this low was last Christmas, right before the S&P fell from 2,075 back to 1,850,…
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Monday Mayhem – Riots in Walker’s Republican Dreamland

Forget the details of why this started.

What you should be concerned about is how easily a protest march in Wisconsin turned into a riot – to the point where Gov Scott Walker called out the National Guard in Milwaukee.  Six businesses were set on fire during Saturday evening’s unrest, and three of them were destroyed.  About 100 protesters had gathered for a demonstration Saturday evening when violence broke out. Chief Flynn said the city’s gunshot detection system was activated 48 times during the unrest, adding that some activations recorded several rounds being fired

Koch-backed Walker has turned Wisconsin into a nightmarish state that is now ranked 49th in the US and is one of 5 states in the country with a contracting economy with a $2Bn budget shortfall in 2015. Walker has cut $1Bn from education, smashed unions, ended paid leave for sick days and maternity leave requirements and, of course, put in "right to work" laws that have stagnated wages for the past 6 years.  

Image result for wisconsin riotsIn short, Walker has implemented the GOPs 2016 platform and his state is in revolt.  He even signed a bill that striped public employees of their collective bargaining rights, barred the traditional collection of union dues and forced workers to pay more for their health care and retirement benefits – things the national GOP want but don't dare put in writing – and this is the result!

The problem is, this is the end of all "cut taxes and cut social programs to pay for it" budget plans – it's only a question of when it is actually time to pay the piper and deploying the National Guard costs a whole lot more than buying a few kids a decent school lunch but then the money doesn't go to a contributing military contractor… politics sure are tricky! 

Meanwhile, in the rest of the World, we're ignoring Japan's horrific 0.2% GDP Report this morning, which would have been negative if not for $276Bn in stimulus spending.  Business investment fell 5.9% and exports fell as well so the only people who
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$2,436 Friday – Yesterday’s Futures Play is Another Big Winner

What a week we are having!  

We don't make public pick in July (earnings months) but we came back strong for the free readers in August and yesterday's long trade idea on Gasoline Futures (/RB) made $2,436 as /RB hit our goal at $1.35 and Natural Gas (/NG) is still at $2.57, so $0 there – for now.  Add that to Wednesday's $3,600 gain on our Futures picks (per contract!) and that's over $5,000 profit in two days just from our morning PSW Report (sign up here so you don't miss them).  

We also had a set-up yesterday morning for a long play on Kate Spade (KATE) and, even if you didn't play the options, you had to be pleased with the 8% gain for the day on the underlying stock.  Someone in chat asked me why we don't have a lot of "short-term" trades and I pointed out that our long-term trades make great money in the short run AND they are much safer, as they have time to mature.  Kate is a good example as our trade idea was:

  • Sell 10 KATE 2018 $15 puts for $2.50 ($2,500)
  • Buy 10 KATE 2018 $15 calls for $5 ($5,000) 
  • Sell 10 KATE 2018 $20 calls for $2.95 ($2,950)

The $15 puts opened at $2.45, the $15 calls opened at $5.10 and the $20 calls opened at $3.10 so the net was the same $450 credit we planned and, at the end of the day, the $15 puts fell to $2.10, the $15 calls are now $5.90 and the $20 calls are $3.37 for net $430 on…
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Thrilling Thursday – Market Money Machine Keeps Paying Us Out!

Wheeeeee – what fun!  

Over and over again they take us back to 18,500 on the Dow Futures (/YM) and 2,180 on the S&P Futures (/ES) and over and over again we short them and pick up $250-500 per contract.  It's a suckers game and we're the guys with the cups challenging the bulls to find the red ball and the bulls are certain it's under one of those cups – just never the one they pick.

It should be like shooting fish in a barrel, making money in this market yet the average hedge fund is up 2% for the year, well behind the 6.5% gain in the S&P.  Yesterday, as we predicted in our Morning Alert to our Members (and tweeted to the general public – as we do from time to time) the market took a nice dive and though it "recovered" to 2,175 on the S&P, the huge declining volume told a very different story.  

I simply run out of ways to tell you what a horribly rigged market this is and that the "rally" is nothing more than a prop job to keep you buying at the top while the "smart money" runs for the hills.  What I said to our Members at 6am was:

Dollar is still diving, testing 95.50 and the indexes are up a lot less than the Dollar is down so huge grain of salt to be taken on the Futures, which are at 18,500 (short on /YM there), 2,180 (good on /ES too), 4,800 (good short for /NQ), 1,232.50 on/TF (also a good short) and 16,800 on /NKD (yet another good short).  Well – I guess I still like the shorts here!  

The Dow bottomed out at 18,420 for a $400 per contract gain.

The S&P bottomed out at 2,168 for a $600 per contract gain.  

The Nasdaq bottomed out at 4,770 for a $600 per contract gain.

The Russell bottomed out at 1,220 for a $1,250 per contract gain.

The Nikkei botomed out at 16,650 for a $750 per contract gain.…
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Weakening Wednesday – Failure at Dow 18,500, S&P 2,180

There's not much gas left in this tank.

Try as we might, we still can't get bullish on this rally.  As I noted in Monday's live interview, it's a ridiculously low-volume rally and that's just not the way you make record highs that stick.  It's actually more like the way that Banksters manipulate the markets to reel in the suckers to offload the last of their shares right before they pull the rug out from under the markets but, what do I know – we're only up 377% in the Short-Term Portfolio (follow us here) where I've successfully predicted every market dip since November of 2013

This isn't about bragging, this is about establishing some credibility so perhaps you listen to me when I say THIS MARKET DOES NOT FEEL RIGHT.  I've written extensively about what I think is wrong with this rally and so far, so wrong as far as getting a summer drop and it's August 10th and I said I'd give up and put some of our cash ($470,376) back to work.  

BUT, there are still 21 days left in August and last August 10th we looked pretty good too and all seemed very well until August 14th (Friday) when suddenly, on Monday the 17th, it wasn't.  That led us to a horrific 250-point (12%) slide in the S&P in just over a week which tested the 1,850 line where we decided to BUYBUYBUY at the time – so it worked out great for us because our headlines were self-explanatory:

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Testy Tuesday – 2,180 and Bust?

Big push or last gasp?  

2,200 is the top of our likely range at the moment and it's just 20 points away on the S&P and that's 400 points higher (22%) than we were in February and, according to our 5% Rule™, a 20% move up with a 2% overshoot is very likely to lead to a 4% pullback to about 2,120 before we'll see anything higher.

The volume gets lower and lower while the market climbs higher and higher and that's exactly the sort of thing Willie Wonka says just before something horrible happens.  I'm just saying…

We're having lots of fun scalping profits intra-day but we still have a generally bearish stance.  This morning, in our Live Member Chat Room, we already had a nice $250 per contract winner on the oil dip from $43.25 to $43 and now (8:15) we're back at $43.25 and, you know what?  We can do it again!  That's the nice thing about fake market moves – you can bet against them over and over.  

I was over at the Nasdaq yesterday discussing my broad market outlook on FaceBook Live, so you can watch that and save us the trouble of going over it again.  Needless to say we're still using yesterday's shorting lines on the Futures as, much like oil – they made great money yesterday and they can make great money again today as the market bucks like a bronco, trying to toss off the bears before it gets too tired to fight the gravity.

Remember, I can only tell you what the market is going to do and how to make money trading it – the rest is up to you!  

We did pick up a long this morning in the Futures and that's an old favorite as well.  It's good not to have all your bets in the same direction but our conviction trade is the oil (/CL) short – that's a melt-down waiting to happen (also outlined in yesterday's post).  Gasoline (/RB) is already well off the highs of $1.39, back to $1.36 and that would put oil back at
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Monday Market Madness – New Highs Amid More Turmoil

What will it take to stop this market?

Like Rasputin, the market has been Poisoned (by bad earnings), Shot (by Brexit), Stabbed (by negative economic reports including 50% reductions in GDP forecasts) and is clearly Drowning in debt – yet it will not die!!!  What is up with that?  Not even the threat of Donald Trump becoming President of the United States is enough to spook the bulls – so far.

This morning the Asian markets were flying, led by Japan gaining 2.5% off the strong US jobs report that led to a strong Dollar and a weak Yen, which makes all the Japanese exporters happy, for as long as that lasts, anyway.  Also lifting the markets are fresh rumors of an OPEC production cut, which had oil (/CL) hitting $42.50 along with $45 on Brent (/BZ) this morning and had us getting back on the Futures shorts in our Live Member Chat Room earlier

We're also shorting the Futures at Dow (/YM) 18,500, S&P (/ES) 2,180, Nasdaq (/NQ) 4,800, Russell (/TF) 1,230 and Nikkei (/NKD) 16,700 but only if 3 of 5 cross under in which case we short the next one to cross and that's then confirmed by the 5th cross under and then we stop out if ANY of them cross back over – very simple and it stops you from losing much money while letting a winner run wild.

If you are bullish you can play it the other way but I'm not and neither are:

  • Stan Druckenmiller (May 4th at the Ira Sohn Conference): “Get out of the stock market.”

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Options Opportunity Anniversary Review – Up 81% in Year One!

Well we're off to a great start.  

I did an extensive review of the OOP during our Live Trading Webinar on Wednesday (@ 38:35) where we looked over our current positions and determined we were well on track to gain another $60,000 (60%) next year but, of course, we won't be just sitting on our laurels – there will be lots of fun trades to make over the next 12 months.  

After our first year (we initiated the portfolio on Aug 8th, 2015) we are now the Top Performing Premium Portfolio over at Seeking Alpha and, in fact, our strategy is outperforming even America's best performing hedge fund (Gerbina Gold Group) by a wide margin.  In fact the 2nd best performing hedge fund is also a gold fund (AIS) and is only up 33.7% for the year – so our diverse portfolio, using our "Be the House – NOT the Gambler" philosophy is proving itself in this market.  

You can read more about that strategy in my January Forbes interview where, on page 4 of the interview, I gave an example trade from the OOP using a bullish spread on oil which was:

Buy 10 UCO July $5 calls for $3.70 ($3,750)

Sell 10 UCO July $10 calls for $1.55 ($1,550)

Sell 10 USO July $8.50 puts for $1.10 ($1,100)

Despite pulling back off the highs, UCO finished on expiration day (July 15th) at $10.91 so the trade expired in the money and returned $5,000 against the net $1,050 initial outlay.  That
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Non-Farm Friday – Is America Working?

It's jobs day!  

On April 8th, we added 144,000 jobs and the S&P went from 2,045 to 2,060 to 2,040 and settled at 2,047.  On May 6th we added only 11,000 jobs and the S&P went from 2,047 to 2,057 to 2,039 and settled at 2,057.  On June 3rd we added 287,000 jobs and the S&P went from 2,104 (was the high) and fell to 2,085 and settled at 2,100.  

So, there's really not much of a pattern other than we're likely to finish where we started and we're starting the day at 2,163 and we've been in a very tight range and we can expect Non-Farm Payrolls to revert to the mean and come in around 160,000 jobs at 8:30.  What's more important is whether we make a little progress in the 4.9% Unemployment Rate – that has stopped going down lately.  

From a market standpoint, we'd like to see hourly earnings continue to rise because, if we're going to move towards any kind of sustainable recovery, we have to begin to put more money in the pockets of our bottom 90% consumers.  

Now the S&P is at 2,164 and that's up 6% since April and I don't see what job outcome would drive it higher than it is now.  Either way, we're going to be hedging a bit bearish into the weekend as the Olympics open tonight in Brazil, which is a country that's in political and economic turmoil and right next to Venezuela, which is a country on the verge of collapse. 

With 60,000 hours of TV coverage scheduled for the Olympics, I imagine the political and economic situation will get some air time and most people in the US are not aware of what sort of disaster is going on south of Trump's wall.

8:30 Update:  Wow, 255,000 jobs were created in July – a total blow-out, way beyond expectations.  Unemployment stayed at 4.9% indicating more and more people are coming back to the labor force, which is good and hourly earnings went up another 0.3% – also good.  The initial market reaction was a quick pop in the indexes, but only 0.25%, tempered by a stronger Dollar,…
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Free Money Thursday – BOE Buys the Bulls Another Day for $79Bn

"Whatever it takes."

That's what Goldman Stooge (yes, it's an official position, so we capitalize) Mark Carney says he is willing to do to get investors to ignore the fact that the Bank of England had to severely reduce their outlook for 2017 GDP, from 2.3% to 0.8% while, at the same time stating that: "recent surveys of business activity, confidence and optimism suggest that the United (for now) Kingdom is likely to see little growth in GDP in the second half of this year."  

Today's move drops the UK's benchmark rate to 0.25%, half of what it's been for the last 7 years and Carney left the door open for even more easing – though not too much, apparently:

“I’m not a fan of negative interest rates,” says Carney. “We have other options to provide more stimulus if needed.”

“We see the effective lower bound as a positive number, close to zero, but a positive number.”

A positive number – but clearly not a positive whole number – that ship has sailed long ago!  The FSTE jumped 1.5% on news that their economy will be right on the edge of recession next year but, of course, that's because the BOE is now pumping $50Bn PER MONTH into the $2.6Tn economy, which would be like our Fed tossing $380Bn/month onto the fire.  That is a staggering amount of QE funneled through the banks by Goldman Sach's former Executive Director – just a coincidence, I'm sure.  

Speaking of Goldman Sachs getting caught using their connections to manipulate the market – the firm was ordered to pay $36.3M to settle a case after they hired a Fed employee and used confidential information he provided to bring in clients to access their access.  This went on for 2 years and involved Billions of Dollars worth of transactions and, in response to the $36M penalty, a GS spokesman said "Ow, my wrist!"  

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Pakistan And Russia Boosting Military Ties With 2017 Drills

By Polina Tikhonova. Originally published at ValueWalk.

Pakistan and Russia are letting go of their Cold War-era grievances and actively strengthening their economic, military and diplomatic ties, while India – Pakistan’s top enemy – is becoming enraged over Pakistan’s friendship with Russia.

Image: Flags of Pakitsan and Russia

Amid the news of U.S. President-elect Donald Trump’s bizarre phone call with Pakistan PM Nawaz Sharif, Cold War-era foes Islamabad and Moscow are melting the ice between them. On Thursday, the Russian Defense Ministry confirmed that R...

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Phil's Favorites

A Big Swirling Italian Mess


A Big Swirling Italian Mess

Courtesy of John Mauldin, Mauldin Economics

“Move to Italy. They know about living in debt: They don’t care.”

– John Lydon

“Italians were eating with a knife and fork when the French were still eating each other.”

– Mario Batali

Italians are headed to the polls this Sunday (and thus this letter is reaching you a little earlier than usual) – but no one is quite sure what is on the ballot. On the surface, the voters are considering whether to approve constitutional reforms that should make the government operate more effectively (or not, depending on your point of view). But many people think t...

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Zero Hedge

Official Washington's "Info-Wars"

Courtesy of ZeroHedge. View original post here.

Authored by William Blum, originally posted at,

On November 16, at a State Department press briefing, department spokesperson John Kirby was having one of his frequent adversarial dialogues with Gayane Chichakyan, a reporter for RT (Russia Today); this time concerning U.S. charges of Russia bombing hospitals in Syria and blocking the U.N. from delivering aid to the trapped population.

When Chichakyan asked for some detail about these charges, Kirby replied: “Why don’t...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Ten Good Pieces of Economic Data From All Around the World (Bloomberg)

It's been a big week for bullish economic data across the globe, from South Korean exports to European manufacturing figures. 

The most important number of the week comes tomorrow: November's U.S. jobs report.

Why 2016 May Be the Year of 'Peak Housing' for Can...

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Kimble Charting Solutions

Interest rates could peak here, says Joe Friday

Courtesy of Chris Kimble.

The talk over the past couple of months has been, interest rates are rising and the Fed will raise rates very soon. Joe Friday feels a big test is in play, before one can say the “rate trend has changed!”

Below looks at the yield on the 10-year note, over the past 20-years.


The yield on the 10-year note has remained inside of falling channel (1), creating lower highs and lower lows, for the majority of the past 20-years. The top of the channel is bein...

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Chart School

Semiconductors Hit Hard

Courtesy of Declan.

Internet troubles have limited me tonight, but the one chart I want to show is the near 5% loss in the Semiconductor Index.  Having escaped relatively unscathed from recent day's selling it was a whirlwind of action for the index today.

This had obvious consequences on the Nasdaq. The Nasdaq did relatively well to suffer just over a 1% loss.  However, there were 'sell' triggers for On-Balance-Volume and Directional Index. There was also an acceleration in the relative underperformance of the index to the S&P. ...

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Members' Corner

Second Hand Stink?

Courtesy of Nattering Naybob.

In what seems to be a recurring scatological humor theme, aka our "Toilet Thursday's" or "Thursday's in the Loo" of the past few weeks, we follow up on The Story of Poo-Pourri.

In Second Hand Stink?, men are not so subtlety reminded that an odiferous fog wafting from the bedroom loo, can indeed kill the moment. 


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Swing trading portfolio - week of November 28th, 2016

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


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

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

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

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

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Digital Currencies

Largest US Bitcoin Exchange Is "Extremely Concerned" With IRS Crackdown Targeting Its Users

Courtesy of ZeroHedge. View original post here.

Last Thursday we reported that in a startling development seeking to breach the privacy veil of users of America's largest bitcoin exchange, the IRS filed court papers seeking a judicial order to serve a so-called “John Doe” summons on the San Francisco-based Bitcoin platform Coinbase.

The government’s request is part of a bitcoin tax-evasion probe, and se...

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Mapping The Market

The Most Overlooked Trait of Investing Success

Via Jean-Luc

Good article on investing success:

The Most Overlooked Trait of Investing Success

By Morgan Housel

There is a reason no Berkshire Hathaway investor chides Buffett when the company has a bad quarter. It’s because Buffett has so thoroughly convinced his investors that it’s pointless to try to navigate around 90-day intervals. He’s done that by writing incredibly lucid letters to investors for the last 50 years, communicating in easy-to-understand language at annual meetings, and speaking on TV in ways that someone with no investing experience can grasp.

Yes, Buffett runs an amazing investment company. But he also runs an amazing investor company. One of the most underappreciated part of his s...

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Epizyme - A Waiting Game

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

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...

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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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PSW is more than just stock talk!


We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more! features the most important and most interesting news items from around the web, all day, every day!

News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...

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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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