Phil's Newsletter

Philstockworld Top Trade Review

Wow, what a market!  

When we left off our last Top Trade Review, we had just completed our first year of Top Trades with 119 trade ideas sent out by alert and, as of our reviews (we don't track them otherwise), 96 (80.6%) of them were winners.  How can we have 96 winners out of 119 in a year?  Well, for one thing our Top Trades are generally bullish and it's been a good year for the bulls and, for another thing, because we utilize our very excellent system of "Being the House – NOT the Gambler" and using options to hedge our positions and sell premium.

The other secret to our success in Top Trades is PATIENCE!!! Patience is the hardest thing we try to teach our Members at Philstockworld as it tends to take years of practice and the nice thing about the Top Trades Membership is that you don't have a choice – we make our picks ONLY when we see a nice opportunity and if that's once a week, twice a week or just once a month – we don't care – we only make picks that have excellent chances of making a profit – 80% chances going by our first year's performance…

Of course, when you are reading our reviews, those losing trades are often still great opportunities as we're long-term VALUE investors and it's a bit arbitrary when we do a review whether or not our idea has caught on yet. Our last review was on Oct 22nd and, at the time, we still liked Chipotle (CMG), which has since popped 10%, Chicago Bridge and Iron (CBI), which is now up 20%, Pearson (PSO), which gained 10% and S&P Ultra-Shorts (SDS) as a hedge, which is down 10% (as expected if the longs are winning).  

So here we are, 6 weeks later and 3 of our 4 losers (75%) have turned into winners already – who says picking stocks is hard?  With that being said, let's see how September and October's pics panned out and remember – keep an eye on the losers!  

Top Trade Alerts come from…
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Thank Trump It’s Friday – Rally Continues Unabated

13 record highs for the Dow since the election!

We finished the day yesterday at 19,614 and that's up 1,731 (9.67%) from 17,883 before Donald Trump saved America just a month ago.  19,671 will be the official 10% move and we did flatline at 18,777 (the 5% line) on the way up but never a pullback.  Per our fabulous 5% Rule™, we expect a 20% retrace of the 10% run so a 2% pullback from 19,671 would be 357 points back to 19,313 but we didn't even pause there on the way up, which is a possible indicator that we're in the midst of a 20% run – not at the top of a 10% run.

This is not, of course, unprecedented.  When Obama was elected, the Dow was at 9,712 in November of 2009 and we added 1,000 points by Jan 14th, 2010 and hit 11,200 by April (up 1,488 or 15%) before having a significant correction and believe me, Republican voters were totally baffled by the markets reaction to that rally as well.  Of course the Dow went on, in the Obama adminstration, to hit 13,600 in Sept for a total gain of 3,888 points or 40% but, at this rate, Trump should be able to blow that gain away before his first 100 days are up.

Because, after all, what's the difference how much we pay for stocks as long as there is someone else willing to pay more for them tomorrow.  That's called "The Greater Fool Theory" and it works fantastically until you run out of fools but Trump got 60M votes – that is a really great number of fools we have to work with!  

Trump just picked Andrew Puzder, CEO of CKE Restaurants, which is Hardees and Carl's Junior, who went private as Apollo bought them in 2010.  Aside from being a strong opponent to raising the minimum wage and running ads like this, when speaking to Business Insider earlier this year, Mr. Puzder said that increased automation could be a welcome development because machines were “always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall or an age, sex or race discrimination case.”  


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2 Trillion Dollar Thursday – ECB Policy Shift Not Enough to Continue?

It has been an incredible month.

Since day one of the Trumpocalypse, money has been flying out of bonds and into equities, with much of the money going into ETFs (aka "dumb money") as bond traders don't tend to be stock pickers so we have widespread, indiscriminate buying that has been boosting our indexes to record levels.  

This morning, the markets looked to Mario Draghi and the ECB to keep the party going and they have, indeed left their interest rates at 0%, punishing savers at least through March and they continue to buy bonds for as little as NEGATIVE 0.4% – effectively paying people to borrow their money.  That bond buying program, however, has been trimmed a bit, from $86.4Bn to $64.8Bn and that in itself is miles down from the Summer, when the Euro was at $1.15 ($92Bn).  We're waiting for Draghi's press conference but, even in the statement – they are already promising more easing if necessary.  

The question is, necessary for what?  Euro Stoxx have already climbed to within 20% of their pre-crash highs but, of course, the EU may have S&P envy, as our own leading index is now 60% higher than it was at the 2008 peak.  Yes, 60% higher!  

Amazingly, no one seems to care that the ECB has now bought $2.5 TRILLION worth of 0% interest bonds and our own Fed has bought $3.5Tn at an average of about 1.25% and that both entities have lost 20% in the last month (a combined $1.2 TRILLION) and that those losses will ultimately be passed down to the citizens, who are the ultimate funders of this massive corporate bailout program (they didn't buy your bonds did they?).

They will, of course, argue that they have caused rates to remain low and that has helped you buy a home or a car but, had they not kept rates artificially low, then the price of the home you bought would have been lower and probably the price of the car too because those markets tend to adjust to the payments people can afford so, by design,
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Will We Hold It Wednesday – Russell 1,350 Edition

I like this chart from Panamaorange at StockTwits:

I'm not a TA guy but I do know when things are overbought and oh boy are we overbought right now.  Volume on the S&P ETF (SPY) was 57M yesterday as we busted up to new highs – that's about 1/2 "normal" volume of 100M, which is already down from 150M last year.  Low volume means low conviction and we pair that with record ETF inflows (dumb money) of $56Bn and we know exactly what this rally is made of.  Small Caps, Financials and Industrials captured most of the flows while, as noted yesterday, money is fleeing from Emerging Markets and Emerging Market Debt – we're simply the "safe haven" – for now

And, of course, money is flowing out of bonds, which are a very bad thing to hang onto when interest rates are rising and December is on pace to blow November's numbers out of the water and, like Richard Gere, that bond money has nowhere else to go except into equities – regardless of how ridiculously priced they are.

And, of course, a person dumb enough to put their money into 30-year notes at 2% isn't going to think twice about running into equities that have a p/e of 30 – that's more like a 3.3% return, at least!  That's also making dividend stocks extra expensive as the coupon clippers love dividend stocks and, as value investors, we're finding bargains very hard to find in that space but we're patient, we can wait for the correction.

Meanwhile, the Dow has climbed to the top of our target range already.  Back on 11/25, we put up a hedge against our Russell Futures (/TF) shorts (was 1,350 then too!) that would cover us for an $11,250 profit if the indexes refused to back down – at the time I said:

In fact, the Russell 2,000 is just under 1,350 and that's up 200 points since early November (not counting their spike down) and that is just shy of 15% so the Dow is MILES behind


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Trumperific Tuesday – What Could Possibly Go Wrong?

Everything is awesome!  

We did get some awesome Consumer Spending numbers yesterday but, as you can see from the chart, it's more of a reflection of inflation than of a confident consumer that's out shopping.  The cost of "essentials" has risen sharply since May, up 8% while discretionary spending has remained flat.  I imagine when the credit card data comes out – we'll see that a lot of this spending has been debt-financed – not the best kind of spending...

Still, the market hates nuance so YAY!!!  Speaking of nuances, did you know that Fitch, Moody's and the S&P have taken a record 1,971 negative ratings actions on emerging-market sovereign and government-related entities in 2016 – and the year isn't even over yet!  Isn't that awesome???  Not since 2007-2008 have we had this kind of uptick in negative ratings and back then the record was only 1,400 – we shattered that in September!

Now I'm not going to say this is a bad thing because NOTHING is a bad thing as far as this market is concerned but, it's kind of a bad thing.  26% of the 134 Sovereigns rated by Moody's still have a negative outlook – so things can get even worse.  When a sovereign defaults, there's a domino effect of companies, private and state-owned, that follow. For once, S&P, Moody's and Fitch may be giving investors early indications of what to expect. The message for now is clear: Developing nations are no longer doing that well.  

I'm not going to dwell on the negative, not when Bloomberg did such a good job of it in their "Pessimist's Guide to 2017".  


We tried shorting yesterday and that failed, with our stops quickly broken to the upside but we're at is again today.   In yesterday's post, I said the Nikkei (/NKD) was my favorite short at 18,500 and we made a +$500 move down to 18,400 (now back to 18,450) but that was disappointing given the Dollars sharp fall back to 100 so today we're not into them but we do have 19,225 on the Dow Futures (/YM) and those components are very stretched and oil
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Monday Madness – Renzi Resigns, Trump Declares War on China (Currency)

Oh my God!  

Shame on any editor who pretends politics shouldn't be discussed in financial posts – their cowardice has led to the election of a man who doesn't even understand that China has been propping UP their currency,  at the insistence of the US and other nations, and have lately been REMOVING their supports and the devaluation of the Yuan is what the REAL market values are currently showing.  

In May of last year, in fact, the IMF officially stated the Yuan was no longer undervalued.  Since 2015, the People’s Bank of China, the central bank, hasn’t been keeping the currency cheap. Rather, it’s been defending the yuan, drawing down its foreign-exchange reserves in order to keep the value aloft. 

Why would it do that, knowing that might hurt the export sector, which provides a huge share of jobs? In the last few years, demand for the yuan has come less and less from trade, and more from investment flowing into China to speculate on the currency’s appreciation against the dollar—a self-reinforcing phenomenon. Those inflows help prevent cash squeezes in the banking system, and push down borrowing costs. Letting the yuan’s value drop might drive that investment out of China, draining cash from the financial system dangerously fast.

Is it too political to point out that the President-Elect of the United States of America COMPLETELY WRONG in his currency statements.  Trump isn’t just wrong about what Beijing is doing, he’s wrong about the impact it might have. This year, even though the yuan depreciated against the dollar, Chinese exports have not picked up thanks to the weak global economy. “It has become less effective and unnecessary for Beijing to use a cheaper yuan to boost exports,” noted Shuli Ren of Barron’s recently, because “the pie is getting smaller and competitive easing can only get you so far.”

Recently, with China’s foreign currency reserves falling to the lowest since 2011, the Chinese central bank are believed to have sold the dollar to ease yuan’s decline, in an attempt to curb record capital outflows—doing exactly the opposite of what Trump claims.  Should I keep quite about this idiocy because this is a financial newsletter and Trump has armies of letter-writing fanatics that…
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Non-Farm Friday – Is America Working?

It's Non-Farm Payroll Day today. 

We should be around 160,000 jobs and this is Obama's last report card as we approach 15M jobs added since 2010.  This ranks Obama way behind Clinton, who created 22.9M jobs but still, it's a pretty good number.  Much more important than jobs, however, is hourly earnings and those have been rising steadily over the same period and that's the number we need to watch for signs of whether or not the economy is healthy.  

President Trump (get used to it) saved 800 jobs yesterday at a cost of just $7M in addition to continuing to provide United Technology (UTX) with $6 BILLION in defense contracts which make up a good portion of their $7.5Bn in profits.  UTX thanked the President by shipping 1,300 jobs overseas anyway and closing another plant in Indiana – the state whose taxpayers are on the hook for the $7M bailout of the hugely profitable corporation.

CNBC analyst Jim Pethokoukis said Trump's speech at Carrier yesterday was "absolutely the worst economic policy speech since Mondale" but that's not fair as Trump isn't actually President yet so we shouldn't count it – I'm sure he'll be able to top it once he's actually in office – there's no way Trump will let himself come in second to Walter Mondale!  

"The idea that American corporations are going to have to make business decisions, not based on the fact that we've created an ideal environment for economic growth in the United States, but out of fear of punitive actions based on who knows what criteria exactly from a presidential administration. I think that's absolutely chilling," he said in an interview with CNBC's "Closing Bell."

And that guy works for a CONSERVATIVE think tank!  

This is going to be a fun four years and I'm very excited by the trading environment, with Presidential tweets moving the market up and down regularly.  Meanwhile, China is wasting no time at all filling the Global leadership gap as President Xi headed straight to Latin America where he's set up a huge trade deal with Ecuador, raised the diplomatic status of Chile and initiated trade relations with Peru.  China already has a wall but
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$1,000 Thursday – Our Futures Shorts Finally Pay Off!

What a crazy market!  

On Tuesday, in the morning post, we put our foot down and called for index shorts in the Futures, saying:

And THAT is why we're short the market here.  That's why we're short the S&P Futures (/ES) below the 2,200 line (with tight stops above) and Dow (/YM) 19,100, Nasdaq (/NQ) 4,875, Russell (/TF) 1,330 and even the Nikkei (/NKD) at 18,500 – because that same economy also can't sustain an ever-rising Dollar.

In fact, we called an audible in our Live Member Chat Room at 10:15 to catch the Russell short at 1,335 so really it was a $1,500 per contract gain for our Members but not a bad gain for you free readers either, more than enough to buy you a subscription so you don't miss those extra $500 moves next time, right?  The adjustments I suggested to our Members in the morning were:

Oil stocks jamming up the indexes but there's an undercurrent of selling so good shorts at 19,200 (/YM), 2,212.50 (/ES), 4,880 (/NQ) and, of course, 1,335 (/TF).  /NKD is no good because the Dollar is rising, now over 18,500 but very tempting to short.  

The Dow (/YM) dropped to 19,120 for a $400 per contract gain and the the S&P (/ES) hit 2,195 for an $875 per contract gain and the Nasdaq (/NQ) fell to 4,805 for a $1,500 per contract gain so not bad for a day's work!  In yesterday's Live Trading Webinar, we flipped to the Nikkei (/NKD) shorts, as they had the farthest left to fall and, of course, we are still liking the oil shorts (/CL) once the squeeze is over, as we test $50.50 this morning.

Watch for Brent (/BZ) to fail $52.50 and that's game on for the /CL shorts but no shorting above those lines.  We caught a $1,000 per contract drop off our first test at $50 yesterday but overnight oil got jammed up again at the Asia open (as they had to square off their accounts at…
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WTI Wednesday – Oil Jams Back to $50 on OPEC BS

Image result for you can fool some of the peopleYou really can fool some of the people all of the time!  

As wisely noted by the great George Bush II, there are some people you can count on to be fools and those people have put their money into oil over and over and over again since September on the same idiotic news that OPEC will cut production from 33Mb/d to 31.5Mb/d.  Since that time, the OPEC members have INCREASED production to over 34Mb/d and the plan is to cut back to the more sustainable 31.5Mb/d and claim victory (and we are long oil in our Options Opportunity Portfolio, expecting it to work out for them).

This morning, Iran's oil minister said Russia will be on board with a 1.4Mb cut (total) and that will bring them down to 32.5Mb/d, which is 1Mb/d HIGHER than what they said in September but what difference do facts make in post-election America?  Just last night, the American Petroleum Institute (API) reported a  weekly 2.3M barrel surplus of Oil (/CL) at Cushing, OK along with a 3.36Mb surplus in Gasoline (/RB) and a 2.24Mb surplus of Distillates – and that's after a holiday weekend, when demand was supposed to pick up.

Stock price graphsAs you can see from this chart of our oil inventories, we are already nearly at full capacity, more than 10% over the top of the range that was set last year and, if EIA confirms the API build at 10:30, $50 oil will be a nice shorting spot because the US alone has a 50Mb surplus vs last year so – even if OPEC where our only supplier, it would take months just to work off our own massive surplus – and that's assuming US producers don't rush in to fill any production gap OPEC leaves on the table. 

Aside from OPEC, it's a big data day on the last day of the month and we expect all hands to be on deck to prop up the markets and close November at those all-time highs so your friendly neighborhood bankster has some nice-looking charts that they will be able to use to pressure you to make "tax-advantaged" moves…
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Testy Tuesday – Will S&P 2,200 Hold on Real Volume?

The low-volume rally comes to an end – now what?

As you can see from this chart of On-Balance Volume, there's been a HELL of a divergence between it and the S&P and, in the end, OBV usually wins out.  OBV is a momentum indicator that uses volume flows to predict price and it's generally very accurate – except when certain key stocks are being propped up in order to create the illusion that there is index strength when, in fact, the people manipulating the market are dumping everything else they hold into the greedy hands of the retail suckers.  Then it looks like this.

Maybe this time is different, right?  Like last fall, when OBV tanked in November and the market didn't collapse in November or December – it collapsed in January, falling from 2,100 to 1,800.  That's only 14% and we're up 7% since Trump was elected so a net loss of just 7% from where you were before the election is no reason not to BUYBUYBUY expensive stocks now, is it?  At least that's what the stock pushers are telling us on TV and they are on TV – so they couldn't be lying to us, could they?

Image result for us wage historyRemember the great bull markets of the 50s and 60s or the late 90s?  What did they have in common?  Rising wages!  Rising wages are the foundation for sustained economic growth and we're simply not there yet and you KNOW what happens when wages stagnate and prices rise, don't you?  Assuming you are not having this article read to you, you were on the planet 8 short years ago when we last suffered the consequences of things rising to the point at which people could no longer afford them.

And by people, of course, I don't mean you – you are in the investor class and you have something 80% of the people in this country do not have, which is MONEY!  You have money in your checking account and money in your savings account – in fact, you have SO MUCH MONEY that you are able to plan for your future – very much unlike 240M of your fellow countrymen.  


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ValueWalk

Build A Sandcastle, Get Fined $500, And Maybe Go To Jail

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

Bryant Rylee lives a seemingly simple life. Before the state intervened in his life, his Facebook page—which has a modest 591 friends—was relatively quiet. However, that was before a sandcastle built by his son caused the city of Panama, Florida, to threaten him with a $500 fine and up to 60 days in jail, a threat that caused his Facebook page to get its “fifteen minutes of fame.”

carolbifulcovasques / PixabaySandcastle

Sandcastles are the epitome of childhood innocence and the manifestatio...



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Zero Hedge

St. Louis Just Hiked Minimum Wage By 43%; Guess What Happens Next

Courtesy of ZeroHedge. View original post here.

Seemingly no amount of empirical evidence will ever convince progressives that raising minimum wages to artificially elevated levels is a bad idea.  Somehow the basic idea that raising the cost of a good ultimately results in lower consumption of that good just doesn't compute. 

And while roughly 50% of the country will promptly ignore it, below is yet another study, from Dr. David Macpherson of Trinity University and Dr. William Even or Miami...



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Kimble Charting Solutions

Strong markets struggling at breakout levels of late

Courtesy of Chris Kimble.

The S&P 500, Banks, Small Caps and Transportation indices continue to climb higher, as the long-term trend remains up. The two charts below, look at performance over the past month and how each index is testing long-term breakout levels.

The chart below looks at how the above mentioned indices have performed over the past 30-days.

CLICK ON CHART TO ENLARGE

These key markets are a little soft the past 30-days. The Power of the Pattern below looks at where this softness is taking pl...



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Phil's Favorites

Warmest February in Decades Spikes Pending Home Sales

Courtesy of Mish.

Economists are crowing over a huge and unexpected spike in pending home sales. The Econoday consensus estimate was a rebound of 2.4% following the 2.8% decline in January. Instead, the index spiked 5.5%.

Major improvement can be expected for existing home sales in the March to April period based on February’s pending home sales index which jumped 5.5 percent to 112.3. This is well beyond the Econoday consensus which was already calling for a sizable 2.4 percent gain. This index tracks initial contract signings and though winter months are always volatile due to seasonality and...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Pound Pares Decline as U.K. Officially Starts Brexit Process (Bloomberg)

The pound touched a one-week low against the dollar as the U.K. prepared to start the process by which it will leave the European Union.

Double-Edged Sword: Home Prices Keep Rising, Home Inventory Keeps Falling (Forbes)

You are thinking about selling your home. A similar place nearby sells for more than you thought it would. You list your home. This is how the housing market is supposed to work. As a result, over time, pric...



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Chart School

Rallies Come Through

Courtesy of Declan.

Bulls were able to deliver across the board gains, helping to position yesterday's action as a swing low. Weakness at this point would offer itself as a buying opportunity, but markets wouldn't tolerate more than a couple of days of losses if they were to go down this route.

The S&P is at resistance of the prior swing low and the 20-day MA, but today's action is looking good for an upside break tomorrow? Technicals are firmly in the red and need more than today's gain to fix them.



The Nasdaq did today...

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OpTrader

Swing trading portfolio - week of March 27th, 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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Members' Corner

More Natterings

Courtesy of The Nattering Naybob

[Click on the titles for the full articles.]

A Quick $20 Trick?

Summary

Discussion, critique and analysis of the potential impacts on equity, bond, commodity, capital and asset markets regarding the following:

  • Last time out, Sinbad The Sailor, QuickLogic.
  • GlobalFoundries, Jha, Smartron and cricket.
  • Quick money, fungible, demographics, QUIK focus.

Last Time Out

Monetary policy is just one form of policy that effects capital,...



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Digital Currencies

Bitcoin Tumbles Below Gold As China Tightens Regulations

Courtesy of Zero Hedge

Having rebounded rapidly from the ETF-decision disappointment, Bitcoin suffered another major setback overnight as Chinese regulators are circulating new guidelines that, if enacted, would require exchanges to verify the identity of clients and adhere to banking regulations.

A New York startup called Chainalysis estimated that roughly $2 billion of bitcoin moved out of China in 2016.

As The Wall Street Journal reports, the move to regulate bitcoin exchanges brings assurance that Chinese authorities will tolerate some level of trading, after months of uncertainty. A draft of the guidelines also indicates th...



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Mapping The Market

Congress begins rolling back Obama's broadband privacy rules

Courtesy of Jean Luc

I am trying to remember who on this board said that people wanted to Trump because they want their freedom back. Well….

Congress begins rolling back Obama's broadband privacy rules

By Daniel Cooper, Endgadget

ISPs will soon be able to sell your most private data without your consent.

As expected, Republicans in Congress have begun the process of rolling back the FCC's broadband privacy rules which prevent excessive surveillance. Arizona Republican Jeff Flake introduced a resolution to scrub the rules, using Congress' powers to invalidate recently-approved federal regulations. Reuters reports that the move has broad support, with 34 other names throwing their weight behind the res...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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Biotech

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 insidercow.com.

Chart below from Yahoo.com

...

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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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