Archive for the ‘Chart School’ Category

The Big Four Economic Indicators: Real Retail Sales

Courtesy of Doug Short.

Note: This commentary has been updated to include the April data for Real Retail Sales.

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. They are:

  • Industrial Production
  • Real Personal Income (excluding Transfer Receipts)
  • Nonfarm Employment
  • Real Retail Sales
  • The Latest Indicator Data

    Real Retail Sales: Retail Sales were flat in April (-0.001%) following the March bounce that in turn followed three months of contraction. The seasonally adjusted Consumer Price Index puts April Real Retail Sales at -0.10%. The chart below gives us a close look at the monthly data points in this series 2009. The linear regression helps us identify variance from the trend.

    The early 2014 dip in sales was generally written off as a temporary result severe winter, and the return to trend sales growth gave credence to the explanation. The early 2015 dip triggered the same rationale. However, the real contraction in April suggests that weak consumer spending is being driven by something beyond weather.

    The Generic Big Four

    The chart and table below illustrate the performance of the generic Big Four with an overlay of a simple average of the four since the end of the Great Recession. The data points show the cumulative percent change from a zero starting point for June 2009.

    Current Assessment and Outlook

    The overall picture of the US economy had been one of slow recovery from the Great Recession. We had a conspicuous downturn during the winter of 2013-2014 and subsequent rebound. And weak Retail Sales and Industrial Production in recent months triggered a replay of the “severe winter” meme. However, we’re now getting data points for Spring months, not the Winter, and as yet we’re not seeing a rebound. Industrial Production has decline for five consecutive months and Real Retail Sales have contracted…
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    ECRI: "Fed Rate Hike May Be Postponed Due to Inclement Data"

    Courtesy of Doug Short.

    Friday’s release of the publicly available data from the Economic Cycle Research Institute (ECRI) puts its Weekly Leading Index (WLI) at 133.9, down slightly from 134.6 the previous week. The WLI annualized growth indicator (WLIg) is at 1.5, up from the previous week’s 1.2, and off its interim low of -4.7 in mid-January.

    “Fed Rate Hike May Be Postponed Due to Inclement Data”

    Here is the excerpt from ECRI’s May 21st report to subscribers currently posted on the company’s website.

    While the Fed remains anxious to hike rates, weak growth may cause further delays in liftoff. Indeed, Q1 GDP growth came in barely positive, and it is now expected to be revised negative. Furthermore, Q1 only saw positive growth because inventory buildup contributed three-quarters of a percentage point to growth.

    But, with inventories likely to act as a drag on Q2 GDP growth, the Fed is facing negative or zero growth for the first half of the year – the result of the growth rate cycle slowdown we called for in December – making a rate hike increasingly unpalatable.

    Access to the full report requires a subscription.

    The ECRI Indicator Year-over-Year

    Below is a chart of ECRI’s smoothed year-over-year percent change since 2000 of their weekly leading index. The latest level is fractionally higher than it was at the start of the last recession.

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    Appendix: A Closer Look at the ECRI Index

    The first chart below shows the history of the Weekly Leading Index and highlights its current level.

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    For a better understanding of the relationship of the WLI level to recessions, the next chart shows the data series in terms of the percent off the previous peak. In other words, a new weekly high registers at 100%, with subsequent declines plotted accordingly.

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    As the chart above illustrates,…
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    What Inflation Means to You: A Look Inside the Consumer Price Index

    Courtesy of Doug Short.

    Note: The charts in this commentary have been updated to include today’s Consumer Price Index news release.

    Back in 2010 the Fed justified its aggressive monetary policy “to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate” (full text). In effect, the Fed has been trying to increase inflation, operating at the macro level. But what does inflation mean at the micro level — specifically to your household?

    Let’s do some analysis of the Consumer Price Index, the best known measure of inflation. The Bureau of Labor Statistics (BLS) divides all expenditures into eight categories and assigns a relative size to each. The pie chart below illustrates the components of the Consumer Price Index for Urban Consumers, the CPI-U, which we’ll refer to hereafter as the CPI.

    The slices are listed in the order used by the BLS in their tables, not the relative size. The first three follow the traditional order of urgency: food, shelter, and clothing. Transportation comes before Medical Care, and Recreation precedes the lumped category of Education and Communication. Other Goods and Services refers to a bizarre grab-bag of odd fellows, including tobacco, cosmetics, financial services, and funeral expenses. For a complete breakdown and relative weights of all the subcategories of the eight categories, here is a useful link.

    The chart below shows the cumulative percent change in price for each of the eight categories since 2000.

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    Not surprisingly, Medical Care has been the fastest growing category. At the opposite end, Apparel has actually been deflating since 2000. Another unique feature of Apparel is the obvious seasonal volatility of the contour.

    Transportation is the other category with high volatility — much more dramatic and irregular than the seasonality of Apparel. Transportation includes a wide range of subcategories. The volatility is largely driven by the Motor Fuel subcategory. For a closer look at gasoline, see this chart in our weekly gasoline update.

    The Ominous Shadow Category of Energy

    The BLS does not lump energy costs into an expenditure category. Instead, it includes energy subcategories in Housing in addition to the fuel subcategory in Transportation. Also, energy costs are indirectly reflected in expenditure changes…
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    Inflation: A Six-Month X-Ray View

    Courtesy of Doug Short.

    Here is a table showing the annualized change in Headline and Core CPI, not seasonally adjusted, for each of the past six months. Also included are the eight components of Headline CPI and a separate entry for Energy, which is a collection of sub-indexes in Housing and Transportation.

    We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components. Some of us have higher transportation costs, others medical costs, etc.

    A conspicuous feature in the year-over-year table is the volatility in energy, significantly a result of gasoline prices, which is also reflected in Transportation.

    Here is the same table with month-over-month numbers (not seasonally adjusted). The nose-dive in energy costs is clearly illustrated, reflected here too in transportation.

    The Trends in Headline and Core CPI

    The chart below shows Headline and Core CPI for urban consumers since 2007. Core CPI excludes the two most volatile components, food and energy. We’ve highlighted the 2% level that the Federal Reserve is targeting for inflation, although the Fed traditionally uses the Personal Consumption Expenditure (PCE) price index as their preferred inflation gauge.

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    Year-over-year Core CPI (the blue line) has been below 2% for 32 of the last 36 months. The more volatile Headline CPI has spent 33 of the past of the past 36 months under the 2% lower benchmark. Much of the volatility in the past few years has been the result of broad swings in gasoline prices (more on gasoline here).

    For a longer-term perspective, here is a column-style breakdown of the inflation categories showing the change since 2000.

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    Note: For additional information on the component composition of the Consumer Price Index, see our Inside the Consumer Price Index.

    A Long-Term Look at Inflation

    Courtesy of Doug Short.

    The Consumer Price Index for Urban Consumers (CPI-U) released this morning puts the year-over-year inflation rate at -0.20%. It is substantially below the 3.84% average since the end of the Second World War and its 10-year moving average, now at 2.19%.

    For a comparison of headline inflation with core inflation, which is based on the CPI excluding food and energy, see this monthly feature.

    For better understanding of how CPI is measured and how it impacts your household, see our Inside Look at CPI components.

    For an even closer look at how the components are behaving, see this X-Ray View of the data for the past six months.

    The Bureau of Labor Statistics (BLS) has compiled CPI data since 1913, and numbers are conveniently available from the FRED repository (here). Our long-term inflation charts reach back to 1872 by adding Warren and Pearson’s price index for the earlier years. The spliced series is available at Yale Professor (and Nobel laureate) Robert Shiller’s website. This look further back into the past dramatically illustrates the extreme oscillation between inflation and deflation during the first 70 years of our timeline. Click here for additional perspectives on inflation and the shrinking value of the dollar.

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    For a long-term look at the impact of inflation on the purchasing power of the dollar, check out this log-scale snapshot of fourteen-plus decades.

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    STTG Market Recap May 21, 2015

    Courtesy of Blain.

    Another quiet session in a week full of them.  The S&P 500 gained 0.23% and the NASDAQ 0.38% as morning weakness was bought.  This is a good sign again, but these gains are of a grinding nature.  Existing home sales for April fell 3.3%, missing an expected 1% gain to 5.24 million units. Earlier in the week, reports showed home builder sentiment fell in May, but housing starts for April came in much better than expected.

    Perhaps we have a nice little bull flag forming on the S&P 500 here after a breakout of a very long range.



    Salesforce (CRM) rallied after a solid earnings report after the bell Wednesday. The business software provider beat estimates by 2 cents with adjusted quarterly profit of 16 cents per share, while revenue was in line with forecasts. The firm also increased its full-year forecast on increased subscription and services revenue.  Recall this company has been the focus of takeover speculation in the past few weeks.

    crm (AMZN) closed up following the announcement that Amazon Prime Now is offering one-hour delivery from local stores In New York’s Manhattan, including groceries, meals, and baked goods.


    Shake Shack (SHAK) surged on a trademark filing that indicated the burger chain might be adding chicken to its menu.


    NetApp (NTAP) tumbled after forecasting sales that missed analysts’ projections.  It was a very ugly chart even before the news.


    Bespoke has an interesting note on the perception of the market by investors. Despite being at/near all time highs there is some negativity out there – maybe it is the grinding nature of the 2015 market.

    This morning’s American Association of Individual Investors (AAII) survey of investor sentiment showed the bulls declined again, to their lowest level since April 19th, 2013: 25.2. This marks the 12th week in a row that bulls’ share has come in lower than 40, and the third in a row it’s been  below 30. It’s also interesting to note that this is one of only seven occurrences since 1987 where bullish sentiment has declined below 26 while the market is within 1% of 52-week highs. At right we chart those prior occurrences on a log-scale time series of  the S&P 500 and a time series of the AAII Bulls.

    Bespoke 2

    Bespoke 3

    Markets Add To Gains

    Courtesy of Declan.

    After yesterday’s FOMC minutes there wasn’t a follow through to the end of day selling.  Buyers were able to control the day’s action with a return to highs. The S&P shaped a handle well above 2115 support, and is again in the process of outperforming the Russell 2000.

    The Nasdaq also closed near the day’s highs, but it traded lower buying volume and remains a few days off its 52-week high.

    The Russell 2000 had perhaps the most disappointing day as it finished with another doji. The last three days have been filled with indecision which is a bit of a fly in the ointment for bulls, but not a rally killer in itself. Bull markets require Small Caps leadership, but unfortunately, Small Caps aren’t leading.

    Finally, Nasdaq Breadth is on the rise from a swing low, not from oversold conditions as was the cast in October 2014, but from a situation similar to March of this year.

    With the long weekend coming, tomorrow is a last chance for buyers to get in (or out) before the Memorial weekend. It’s a big news day for Europe and the U.S., so plenty of action can be expected.

    You’ve now read my opinion, next read Douglas’ and Jani’s.

    Existing-Home Sales Lose Momentum in April

    Courtesy of Doug Short.

    This morning’s release of the March Existing-Home Sales disappointed expectations, slipping to a seasonally adjusted annual rate of 5.04 million units from an upwardly revised 5.21 million in March (previously 5.19 million). The consensus was for 5.24 million. The latest number represents a 3.3% decrease from the previous month but a 6.1% increase year-over-year.

    Here is an excerpt from today’s report from the National Association of Realtors.

    Lawrence Yun, NAR chief economist, says sales in April failed to keep pace with the robust gain seen in March. “April’s setback is the result of lagging supply relative to demand and the upward pressure it’s putting on prices,” he said. “However, the overall data and feedback we’re hearing from Realtors® continues to point to elevated levels of buying interest compared to a year ago. With low interest rates and job growth, more buyers will be encouraged to enter the market unless prices accelerate even higher in relation to incomes.”   [Full Report]

    For a longer-term perspective, here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 is available in the St. Louis Fed’s FRED repository here.

    Click to View
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    Over this time frame we clearly see the Real Estate Bubble, which peaked in 2005 and then fell dramatically. Sales were volatile for the first year or so following the Great Recession. The latest estimate puts us back to the general level around the turn of the century.

    The Population-Adjusted Reality

    Now let’s examine the data with a simple population adjustment. The Census Bureau’s mid-month population estimates show a 15.5% increase in the US population since the turn of the century. The snapshot below is an overlay of the NAR’s annualized estimates with a population-adjusted version.

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    Existing-home sales are 3.3% below the NAR’s January 2000 estimate. The population-adjusted version is 15.6% below the turn-of-the-century sales.

    S&P 500 Snapshot: 10th Record Close of the Year

    Courtesy of Doug Short.

    The S&P 500 hits its -0.14% intraday in the opening seconds. But the 10 AM announcement of disappointing existing home sales and a weaker than forecast reading from the Philly Fed index put the index in modest rally mode. It then trended sideways with a pop to its 0.40% intraday high twenty minutes before the close trimmed closing gain of 0.23%. Today’s advance was the 10th record close of the year.

    The official yield on the 10-year note closed at 2.19%, down seven bps from the previous close.

    Here is a 15-minute chart of the past five sessions.

    Here is a daily chart of the SPY ETF, which gives a better sense of investor participation (or lack thereof). Today’s volume was the second lowest of 2015.

    A Perspective on Drawdowns

    Here’s a snapshot of selloffs since the 2009 trough.

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    For a longer-term perspective, here is a charts base on daily closes since the all-time high prior to the Great Recession.

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    Vehicle Miles Traveled: A New Look at Our Evolving Behavior

    Courtesy of Doug Short.

    The Department of Transportation’s Federal Highway Commission has released the latest report on Traffic Volume Trends, data through March.

    “Travel on all roads and streets changed by 3.9% (9.8 billion vehicle miles) for March 2015 as compared with March 2014.” The less volatile 12-month moving average is up 0.31% month-over-month and 2.64% year-over-year. If we factor in population growth, the 12-month MA of the civilian population-adjusted data (age 16-and-over) is a smaller change, up 0.24% month-over-month and up only 1.48% year-over-year.

    Here is a chart that illustrates this data series from its inception in 1971. It illustrates the “Moving 12-Month Total on ALL Roads,” as the DOT terms it. As we can readily see, the Great Recession had a substantial impact on our driving habits.

    Click to View
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    The rolling 12-month miles traveled contracted from its all-time high for 39 months during the stagflation of the late 1970s to early 1980s, a double-dip recession era. The most recent decline lasted for 85 months, the trough in November 2011, 48 months from the previous high. The latest data point is a new high.

    The Population-Adjusted Reality

    Total Miles Traveled, however, is one of those metrics that should be adjusted for population growth to provide the most meaningful analysis, especially if we want to understand the historical context. We can do a quick adjustment of the data using an appropriate population group as the deflator. Let’s use the Bureau of Labor Statistics’ Civilian Noninstitutional Population Age 16 and Over (FRED series CNP16OV). The next chart incorporates that adjustment with the growth shown on the vertical axis as the percent change from 1971.

    Click to View
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    Clearly, when we adjust for population growth, the Miles-Traveled metric takes on a much darker look. The nominal 39-month dip that began in May 1979 grows to 61 months, slightly more than five years. The trough was a 6% decline from the previous peak.

    The population-adjusted all-time high dates from June 2005. That’s approaching a decade ago. The latest data is 7.29% below the 2005 peak, which is not that far off the -8.64% post-Financial Crisis…
    continue reading


    Zero Hedge

    Greece Could Trigger a $9 Trillion Chain Reaction

    Courtesy of ZeroHedge. View original post here.

    Submitted by Phoenix Capital Research.

    Greece has had between two and three bailouts since its debt crisis began in 2010 (depending on what you believe constitutes a bailout). As stressful as the numerous rounds of negotiation have been from 2010 until 2015, Greek leaders have never before floated the idea of default.... until now.

    Greece said Sunday that it won’t have the money it is due to repay to the International Monetary Fund next month unless it strikes a deal with international creditors over further rescue funding.


    Interior Minister Nikos Voutsis told privately owned television station Mega th...

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    Kimble Charting Solutions

    U.S. Dollar/Yen breaks 18-year resistance line, good for Nikkei 225?

    Courtesy of Chris Kimble.


    The chart above takes a look at the U.S. Dollar/Yen ratio over the past few decades. Monthly resistance line (1) has been in play for the past 18-years. As the month of May is nearly over with, the US$/Yen is making an attempt to break above this long-term resistance line.

    It is frequently expressed that Yen weakness, can be a positive for the Nikkei 225 index. Below looks at the Nikkei Monthly, over the past 30-years.


    This chart reflects that the Ni...

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    Chart School

    Richmond Fed: Manufacturing Flattened in May

    Courtesy of Doug Short.

    Today the Richmond Fed Manufacturing Composite Index squeaked back above the flatline with a 4 point increase to 1 from last month's -3. had forecast a rise to 0. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at -3.3, in modest contraction.

    The complete data series behind today's Richmond Fed manufacturing report (available here), which dates from November 1993. Here is a snapshot of the complete Richmond Fed Manufacturing Composite series.


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    Swing trading portfolio - week of May 24th, 2015

    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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    Phil's Favorites

    News You Can Use From Phl's Stock World


    Financial Markets and Economy

    What the Supreme Court’s fixes for retirement savings may do to your 401(k) (Market Watch)

    There’s no denying the effect that fees have on investments. While the difference between a fee of 0.5% and 0.25% looks tiny on paper, apply it to an index fund over a quarter-century or more of investing and let the effects of compounding work on it and you can easily see a worker winding up with tens of thousands of dollars less on account at retirement.

    So it’s easy to see how and why the case protects workers and retirement savers.

    The potential problems from the ruling are much harder to see, but they’re just beneath the surface now and likely to surface a...

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    All About Trends

    Mid-Day Update

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

    Click here for the full report.

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

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    Big Pharma's Business Model is Changing

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

    Understanding the new normal of a business model is key to the success of any company.  The managment of companies need to adapt to the changing demand, but first they must recognize what changes are taking place.  Big Pharma's business model is changing rapidly, and much like the airline industry, there will be but a handful of pharma companies left at the end of this path.

    Most Big Pharma companies have traditionally done everything from research and development (R&D) through to commercialisation themselves. Research was proprietary, and diseases were cherry picked on the back of academic research that was done using NIH grants.  This was in the heyday of research, where multiple companies had drugs for the same target (Mevocor, Zocor, Crestor, Lipitor), and could reap the rewards on multiple scales.  However, in the c...

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    Sector Detector: Bullish technical picture appears to trump cautious fundamentals

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

    Courtesy of Sabrient Systems and Gradient Analytics

    By Scott Martindale

    Stocks closed last week on a strong note, with the S&P 500 notching a new high, despite lackluster economic data and growth. I have been suggesting in previous articles that stocks appeared to be coiling for a significant move but that the ingredients were not yet in place for either a major breakout or a corrective selloff. However, bulls appear to be losing patience awaiting their next definitive catalyst, and the higher-likelihood upside move may now be underway. Yet despite the bullish technical picture, this week’s fundamentals-based Outlook rankings look even more defensive.

    In this weekly update, I give ...

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    Digital Currencies

    Nasdaq's bitcoin plan will provide a real test of bitcoin hype


    Nasdaq's bitcoin plan will provide a real test of bitcoin hype



    Bitcoin, the virtual digital currency, has been called the future of banking, a dangerous fad, and almost everything in between, but we're finally about to get some solid data to help settle the debate.

    On Monday, the Nasdaq (NDAQ) stock exchange said it would ...

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    Market Shadows

    Kimble Charts: US Dollar

    Which way from here?

    Chris Kimble likes the idea of shorting the US dollar if it bounces higher. Phil's likes the dollar better long here. These views are not inconsistent, actually, the dollar could bounce and drop again. We'll be watching. 


    Phil writes:  If the Fed begins to tighten OR if Greece defaults OR if China begins to fall apart OR if Japan begins to unwind, then the Dollar could move 10% higher.  Without any of those things happening – you still have the Fed pursuing a relatively stronger currency policy than the rest of the G8.  So, if anything, I think the pressure should be up, not down.  


    UNLESS that 95 line does ultimately fail (as opposed to this being bullish consolidation at the prior breakout point), then I'd prefer to sell the UUP Jan $25 puts for $0.85 and buy the Sept $24 call...

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    Mapping The Market

    An update on oil proxies

    Courtesy of Jean-Luc Saillard

    Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 


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    Watch the Phil Davis Special on Money Talk on BNN TV!

    Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene


    The replay is now available on BNN's website. For the three part series, click on the links below. 

    Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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    Help One Of Our Own PSW Members

    "Hello PSW Members –

    This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at with any questions.

    Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

    Thank you for you time!

    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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