Phil's Newsletter

Weakening Wednesday – Will We Follow Europe Lower?

Wheeeeee – what a ride!  

Looking at the Euro Stoxx 50 index, you can understand why the UK got off this sinking ship.  2,800 WAS the -20% line from 3,500 and that just failed so we're way past a bear market in EU stocks and it has little to do with the aftermath of Brexit and everything to do with what led up to Brexit in the first place.  

The EU destroyed Greece and now (as I predicted 2 years ago), Italy is next in the crosshairs and though Portugal and Spain are way ahead of the UK in line, what can you do to stop the ECB and their nightmarish policies if you remain tied to them through the EU?

The EU is killing Italy – it's killing all of them.  While Italy is a taker state and benefits from the relationship, they have now hit the cut-off point (like Greece) and suddenly Big Daddy EU starts slapping them around and taking disciplinary actions and it's no fun anymore.

BMPS (Monte Paschi) is down 75% to 0.37 and it's the 3rd largest bank in Italy.  Rather than realize the systemic importance of the bank (it is to Italy but to the ECBs board, it's competition), they are demanding BMPS cut $11Bn in bad loans which is another way to say – book the losses.  Obviously, that will crush the bank and the ECB has generously given them until Friday.  UCG (UniCredit) is the largest bank and they are down 63% and 2nd largest, ISP (Intesa Sanpaolo) are testing the -50% line.

Italian banks have $400Bn in non-performing loans, which is 20% of their GDP, that would be like our banks having $4Tn worth of bad debt that needs to be bailed out (been there, done that).  Negative rates (set…
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Tumbling Tuesday – Markets Wake Up to Realize Risks


It is so funny to see all the chickens we've been warning about come home to roost – especially when it happens WHEN we thought it would.  As noted in our July Portfolio Review, we are well-positioned for a downturn, having just boosted our hedges during last week's "rally" and already this morning we're glad we did as the Dow is looking at a 100-point drop at the open which is NOTHING compared to Europe's 1.5% decline into lunch.  

As you can see from the chart (despite it's awful choices of key colors), the Brexit dominoes are lining up already and the worst thing that can happen to the EU is for the UK to emerge from their exit with their economy intact.  Fortunately for them, that doesn't seem to be a problem at the moment as economic confidence in the UK has fallen off a cliff as the Top 10%'ers who were betting a Brexit would never happen are now scrambling to cover their mistaken bets. 

And I don't mean at the bookmakers, I mean the bets they made with their company's futures, hiring plans, capital allocation strategies, loan and investment portfolios – these idiots have been living in a bubble and that bubble has just popped all around them and now the Top 10% all over Europe have to wake up to the reality that the Proletariat still have a bit of power and are willing to use it – no matter how much you try to cower them into submission. 

Nigel Farage has now joined Boris Johnson in stepping down now that they've won the UK vote and we had a discussion in our weekend chat as to whether it's a noble thing that shows they weren't in it for political gain or whether they just grabbed the wheel on the Titanic, steered it into an iceberg and are now grabbing the first lifeboat off the ship.

Morgan Stanley is assuring us that "Brexit is not a systemic risk" and the fact that they have to say that should terrify you.  As I pointed out to our Members, people don't say "Remain calm, all is well" when things are
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Philstockworld July Portfolio Review – Are We Too Bullish?

$1,519,454 – that's up 153% from our $600,000 start on our paired portfolios and, more importantly, up $69,064 since our April 24th review (11.5% in 5 weeks).  

Our Long-Term Portfolio alone has climbed over the Million Dollar mark, up 100% from our $500,000 buy-in back in November, 2013.  At this point, we're so far ahead of our target (20% per year) that we'll probably start a new portfolio in the fall.  We already purged plenty of short puts from our LTP and we're certainly well-positioned to add new trades as we have plenty of cash on the side!

Meanwhile,  the S&P was at 2,080 on April 24th and it's at 2,102 today so fairly flat after dipping to 1,991 and it's important to note that our hedges did exactly what they are supposed do do – they allowed us to ride out the dip without panicking and, because we are Being the House – NOT the Gambler, we continue to collect our sold premiums – even when the market is essentially flat.  As I said in the last review:

To you day traders out there – I implore you  - please read the December review and look over those positions and check out those same positions 3 months later and CONSIDER – please consider – that day-trading may not be the best way to play the market.  Yes, the LTP goes up and down too but, when it's down, we have cash on the side to buy bigger positions (which is what we did last year) while they are cheap.  Since those positions are INVESTMENTS, we end up with something of great value when the market comes back.

As you can see from the S&P chart, markets are volatile things and, if you want to be a long-term investor, you need to plan on that volatility – not be surprised by it!  I could say the same thing about the S&P since last June as I'm saying about it since April 24th – the market has gone nowhere but has had extreme dips and the best way to play it is to BE THE HOUSE and let other people take the risks for us.

Our Options
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TGIF – New Quarter, Same BS in the Markets

(Shout) a little bit softer now
(Shout) a little bit louder now
Jump up and shout now
(Shout) a little bit softer now
(Shout) a little bit louder now
Hey-hey-a hey
(Shout) a little bit softer now
(Shout) a little bit louder now

This is one crazy MoFo market – and so much fun to trade!  

Just this morning we had some crazy Gasoline (/RB) Futures trades in our Live Member Chat Room as it plunged from our $1.50 long line (after hitting $1.51) all the way back to $1.47 where we doubled down and now we're out even at $1.485 and hoping for a return to $1.51 for a $1,050 per contract gain to take us into the holiday weekend.  Of course the gain is better if you waited for $1.47 before starting – but we didn't.  

Heading into the holiday (and bear with me as I like to pretend fundamentals still matter):

  • Puerto Rico is missing their $2Bn bond payment today and will go into default, triggering payouts of similar Billions from the bond insurers like (AMBC) and (AGO), so we'll keep an eye on their stocks.  There may be a last minute save but a tough thing to pull off on a Friday before a holiday – you know Congress is already gone…  
  • Gold flew back to $1,340 this morning so you know something is up.  Silver (our old favorite metal) is now $19.30 and yes, we still have SLW in the LTP, so far in the money it's boring now and on track for the full $4,000 gain – up 800% on cash in the LTP and, for the low-margin crowd, the STP has a smaller trade we will cash out here at $26,000 against net $2,400 invested on 10/16 (983%).  You know we love a trade when it's in our Long-Term and Short-Term Portfolio!

  • Now Europe is having a temper tantrum because the UK won't leave.  Yes, they voted to leave but they haven't

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Fake, Flat, Final Thursday of Q2

Oh please!  

Do I really have to pretend it's some kind of coincidence that we have raced back to close the quarter just above where we started it in order not to be perceived as a conspiracy theorist?  It's not a theory when it happens all the time, is it?

And look at the volume, we gained 70 S&P points in two days on less than half the volume we had when we fell.  How does the market go up that much with so much less money coming in?  As I noted yesterday, it's a house of cards that can be easily toppled once today's window-dressing event is over.  Also, bulls should be very concerned that 2,076.50 is the 50-day moving average on the S&P and, if we can't get over that today – it's a technical failure anyway.  

This is not, by the way, sour grapes.  Though we believe the market is heading lower (still looking for 1,850 on the S&P over the summer), we are very much in neutral with our paired long and short-term portfolios.  On Tuesday we noted that our STP was up to $536,627 and our LTP was at $959,373 as of Mondays close at the lows (see post for strategy details).  70 S&P points later, our LTP has jumped to $1,004,321 and the STP as fallen to $510,062 and that's a combined $1,514,383 (up 152%) and that's UP $18,383 in two days (1.2%). 

So we made more money on the way down and we made more money on the way up.  Is it alchemy?  No, it's BALANCE!  We balance our portfolios into uncertain events and, although we have an overall neutral stance, because we are "Being the House - NOT the Gambler", we are still collecting those premiums – no matter which way the market goes.  I don't think you can have a better stress test of our system than we've had in the past few days!  

Learning how to Be the House and how to balance our portfolios allows us to make money in any kind of market conditions and, more importantly, it allows us to TAKE A VACATION.  I went to Florida last Thursday and came back on Tuesday

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Will We Hold It Wednesday – Strong Bounce Edition

Go kitty cat, go!  

On the right is the S&P chart and you can see the huge volume levels as we sold off with 553M shares traded on the S&P ETF (SPY) in two down days as the S&P fell from 2,113 on Thursday to 1,991 on Monday (122 points, 5.7%).  Yesterday, we popped back to 2,036, which is 45 points off the low but the volume on SPY was only 158M.

Let's say, for example, that you are re-building a 122-point wall that was knocked down and there were 550 bricks in the wall and you begin to re-build the wall and, as you are 45-points back up (37%), you realize you only used 158 bricks (29%).  Is that wall going to be weaker or stronger than the one that got knocked down?  Would you trust your family to be safe behind that wall?  Would you trust your investments to be safe?  

SPX WEEKLYYes, an 8% difference doesn't seem like a big deal but it's actually 158 out of 203 (37% of 550) that should have been used so we're 45 bricks short, so far, and that's 22.4% short.  So, going back to the market, we are getting to the same overbought levels but now with 22.4% less cash supporting the run than we had before.  That's really not good!  

The market was already a house of cards (as evidenced by our rapid collapse over the UK's vote to leave the EU within the next 2 years – ridiculous!) and now we've removed 22% of the cards yet there are still strong winds blowing in from China, Japan, Brazil, Venezuela (still rioting) and don't even get me started on how we're up again today, rallying over the bodies of 36 dead and 147 injured at the Istanbul Airport.  Is terrorism now a rally signal?  

Turkey is on it's way into the EU as the UK is on the way out but, for now, we can ignore this terror attack, just like we ignored 35 dead and injured on Jan 12th, 49 on the 13th, 7 on the 18th, 4 on the 27th, 99 in February, 329 in March, 160 in April, 67 in May and 384…
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Tuesday: Market Makes Weak Bounces off the Lows – So What?

Watch out for dead cats!  

I think we should at least get to our strong bounce lines (more on that later) but, for the moment, our 5% Rule™ warns us that, after a 5% drop, we EXPECT a 1% bounce (weak) and we're not impressed until we spend a full day above a 2% bounce (strong).  In Europe, where they dropped 10% in two days, +2% is a weak bounce and +4% would be strong – we're only at our weak bounces folks – don't get excited

Friday is the last trading day of the quarter so we can expect a lot of window-dressing and I would be much more concerned about a quick return to our highs – especially on low-volume, pre-market BS like we have today (see morning tweet) than if we grind along at the -5% line and form a serious base we can build off.  On the whole, this wasn't much of a correction – it didn't even trigger our long-term hedges — yet.  

Wednesday's Russell Ultra-Short ETF (TZA) hedge was only $1 yesterday morning but finished the day at $2.05 – up 105% for the day on the 3.3% drop in the Russell and THAT is how we hedge!  30 contracts purchased for $2,550 (0.85/option, $85 per contract) ended the day at $6,300 for a $3,750 (147%) gain but it will be easy come, easy go this morning as much of that is given back and we didn't take them off the table yet.  

A hedge is there to prevent us from losing money on our long positions – it's insurance, not a bet – don't confuse the two!  If the market went lower, the hedge could pay up to $12,450 to offset our losses but, as it was, we haven't really needed the offset so far and our portfolios have weathered the storm with hardly a scratch.  

While our 100% bullish Long-Term Portfolio dropped back to $959,805 (up 92%) yesterday, our Short-Term Portfolio (where the hedges are) blasted up to $536,627 (up 436%) for $1.496M, up almost $900,000 (150%) from our $600,000 start for our paired portfolios.…
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Monday Market Meltdown – Thriving on Chaos

This is the end 
My only friend, the end 

Of our elaborate plans, the end 
Of everything that stands, the end 
No safety or surprise, the end 

Well, we couldn't be happier.

I'm sorry if you're reading this and you are losing money in this downturn – clearly you're not one of our Members as we had a very happy Friday in our Live Member Chat Room talking about all those juicy opportunities as we watched the herd of market gazells panic into the canyon, where we have them completely surrounded.  

We cashed out the last of our risk on June 7th and I discussed it in our morning post on June 8th, while the Dow was hitting 18,000 and everyting still seemed awesome.  My comment at the time was:

That's right, the Dow hit 18,000 and we took the money and ran, closing out over half of our uncovered Long-Term Portfolio positions, pretty much everything that was up 40% or more, getting our CASH!!! off the table just in time to take a 2-week trading vacation ahead of the June 23rd Brexit vote.  It's so much easier to take your money off the table while things are still going up – you get much better prices from all the suckers who are still buying (they are called "bagholders" by market professionals).

If you are one of those bagholders, I am truly sorry but not for my lack of warning you as we had been talking about Brexit and the potential repercussions for a good month before that yet the market kept on rallying but we expected a market correction regardless for solid, FUNDAMENTAL reasons and, as I said at the time:

SOMETHING is going to hit the fan this summer.  After the Brexit vote, even if the UK remains, then we will turn our attention to Brazil with 6 weeks to the Olympics (Aug 5th) that country and their disastrous economy (World's 5th largest) will be in the news constantly – as will fears of the Zika virus, which is bad enough that 150 experts petitioned the World Health Organization to postpone or move the Olympics to avoid a possible global pandemic

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T (Told You So) GIF – Brexit Victory Rocks the Market

Prime Minister David Cameron said he would resign after the U.K. voted to leave the European Union. He said a new leader will be in place by October.Wheeeeeee – what fun! 

What do you want me to say?  I could not possibly have warned you more, I couldn't possibly have said CASH!!! or "Cashy and Cautious" one more time without sounding like an idiot and I could not have given out more hedging ideas or better shorting lines on the Futures to save you from being "surprised" by the vote by the UK to leave the EU and the market repercussions we're seeing today.  In fact, right in yesterday's morning post I told you:  

Nice test of 2,100 on /ES, which is a good shorting line along with 17,8000 on /YM, 4,450 on /NQ and 1,160 on /TF and 16,600 on /NKD is ridiculous since the Dollar is down half a point (93.23) but safer to short the US indexes since the Dollar coming back would be good for /NKD.

This morning I called longs on our indexes in a 3:38 am Alert to our Members and we caught a nice move up and I'm not even going to talk about how profitable yesterday's Futures shorting ideas were since it seems like crazy, unrealistic money when you catch a 5% correction and, anyway, if you missed it – it's not like these happen every day, week, month or year.

That's why I was making such a big deal about it – how often are we able to get ourselves ahead of a major market correction?  As I have been saying, the RISK of the market making new highs and us regretting missing a bit of a move higher were/are nothing compared to the REWARD we now have from flipping short and moving to CASH!!!, where we now get to go bargain-hunting on all those stocks people are panicking out of.

We're in no hurry to do anything, however – let the chips fall where they may over the weekend and we'll see how sentiment is running over the weekend.  Our morning longs have already stopped out and, on the whole, the S&P
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O Brexit Day! Callooh! Callay!

"And, has thou slain the Jabberwock?

  Come to my arms, my beamish boy!

O frabjous day! Callooh! Callay!'

  He chortled in his joy.

`Twas brillig, and the slithy toves did gyre and gimble in the wabe.  All mimsy were the borogoves, and the mome raths outgrabe.

Yep, that's about how much sense the morning run makes as the UK heads to the polls on Brexit day.  Early exit polls show the Remain camp with a slight lead and our indexes have rocketed back to their highs, where we've taken the opportunity to short them this morning.  My note to our Members in our Live Chat Room was:

Nice test of 2,100 on /ES, which is a good shorting line along with 17,8000 on /YM, 4,450 on /NQ and 1,160 on /TF and 16,600 on /NKD is ridiculous since the Dollar is down half a point (93.23) but safer to short the US indexes since the Dollar coming back would be good for /NKD.

For our Futures, we're shorting at the 1% lines and expecting at least a small pullback off the EU's 2.5% lines to pull us back a bit.  /NKD is happy because it's the Euro and Pound driving down the Yen, not the Dollar..

It's very easy to play the Futures.  We had a Live Trading Webinar yesterday and we made $475 in 30 minutes just demonstrating it (we were long Oil (/CL) and Gasoline (/RB) Futures at the time, now short oil at $50 with tight stops above).  

Why are we shorting?  Aside from the obvious technical reason, the initial reaction is often an over-reaction and there is NO WAY that they can be certain of the vote since they haven't even begun to count yet.  In fact, per this chart of the UK announcements, we won't hear the first official count until 5pm EST, as the polls don't even close until 10pm in the UK and it won't be until 5am UK (midnight EST) that 75% of the votes are counted…
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Zero Hedge

Walls, Going Viral

Courtesy of ZeroHedge. View original post here.

By Chris at

Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.

Welcome to this week's edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all it's glorious insanity.


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Market News

New You Can Use From Phil's Stock World


Financial Markets and Economy

Trillion-Dollar Payout May Mean Peak Largesse for U.S. Investors (Bloomberg)

A total $600 billion in share repurchases and $400 billion in dividends will be doled out by S&P 500 Index members by the end of the year, the biggest combined payout in history, according to strategists at Barclays Plc. Gravy like that is getting tougher to sustain as corporate profits suffer a six-quarter slump and cash levels begin to dwindle.

Deutsche Bank Could Be The “Lehman Moment” Of 2016 (Value Walk)


more from Paul


What Millennials Reject Is Mutant Capitalism

By The Foundation for Economic Education. Originally published at ValueWalk.

It’s not exactly news that capitalism has an image problem. Say the word “capitalist” and the image that comes to mind is of a rapacious, self-interested robber baron – less Steve Jobs or Warren Buffett, more Charles Montgomery Burns.

Among young people, the problem is even more severe. For the generation who came of age during the financial crisis, argues George Koopman of the Mercatus Centre in the Wall Street Journal:

“…capitalism isn’t about free enterprise, nor is it about the startups and innovation. When they hear the term, millennials think about Wall Street bailouts, corporate greed, political scandals and tax codes riddle...

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Phil's Favorites

Another Lehman Blunder Coming Up?

Courtesy of Mish.

Telegraph writer Ambrose Evans-Pritchard says the Fed risks repeating Lehman blunder as US recession storm gathers.

The key problem with Pritchard’s superficial analysis is the Lehman bankruptcy is about the only thing the Fed got right.

Liquidity is suddenly drying up. Early warning indicators from US ‘flow of funds’ data point to an incipent squeeze, the long-feared capitulation after five successive quarters of declining corporate profits.

Yet the Fed is methodically draining money through ‘reverse repos’ regardless. It has set the course for a rise in interest rates in December and seems to be on automatic pilot...

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Kimble Charting Solutions

Bio-Tech; In more trouble if this fails, says Joe Friday

Courtesy of Chris Kimble.

At one point in time, actually for years, Bio-Tech (IBB) was a market leader. From the 2009 lows to 2015, IBB out gained the S&P by more than 250%. Since the summer of 2015, Bio Tech has remained a leader, a “downside leader!” IBB has lagged the S&P by over 35% in the past 15-months.

Is the downside leadership over for IBB? Below updates the pattern on IBB


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Chart School

SP500 Status Pre US 2016 Elections

Courtesy of Read the Ticker.

Where have we been, what does the future look like?

More from RTT Tv

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

Investing Quote...

..."There is what I call the behaviour of a stock, actions that enable you to judge whether or not it is going to proceed in accordance with the precedents that your observation has noted. If a stock doesn’t act right don’t touch it, because, be...

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Members' Corner

The Orlando Massacre Part 3

Courtesy of Nattering Naybob.

A continuation of a Naybob of IT's Natterings from Part 1 and Part 2...

While many Christian churches expressed grief and offered free funeral services for the victims of the Orlando shooting, the fundamentalist Westboro Baptist Church held an anti-gay protest during the funeral of the victims.

But the Westboro Baptist Church's protest rally was blocked by about 200 people who formed a human barricade on the main street in downtown Orlando, ...

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Swing trading portfolio - week of October 17th, 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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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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Digital Currencies

Gold, Silver and Blockchain - Fintech Solutions To Negative Rates, Bail-ins, Currency Debasement and Cashless

Courtesy of ZeroHedge. View original post here.

By Jan Skoyles

I was so pleased yesterday by the announcement that I have joined the Research team at GoldCore as it meant that I could finally start talking about it and was back in a role that lets me indulge in my passion by researching and geeking out on all things gold, silver and money.


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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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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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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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