Archive for the ‘Uncategorized’ Category

6 reasons the FOMC is unlikely to move in September

 

6 reasons the FOMC is unlikely to move in September

Courtesy of Sober Look

The majority of economists still expect the Federal Reserve to begin the long-awaited liftoff next month.

However is this dovish FOMC truly prepared to "pull the trigger" this time? Here are some reasons the central bank is likely to delay the first hike.

1. While the Fed officially talks about not being focused on the currency markets, the recent dollar rally should give them some food for thought. The global "currency wars" have sent the trade-weighted US dollar to the highest levels in over a decade. This will continue to put pressure on US manufacturing (and even some services sectors) as US labor and other costs of production rise relative to other nations.
 

 

2. Commodity prices, led by crude oil and industrial metals, hit new multi-year lows, reigniting disinflationary pressures. Note that the Bloomberg Commodity Index is at the lowest level since 2002. Some at the Fed continue to view this as "transient", but the full impact of such a move is yet to be fully felt in the economy. Here is a broad commodities index.
 

 

Source: barchart


In fact as of Sunday night in NY, WTI futures are trading below $40/bbl.
 

Source: barchart


3. Driven to a large extent by commodity prices as well as economic weakness in China, US breakeven inflation expectations are declining sharply as well. Does this look like a great environment to begin raising rates?
 

4. Some point to the recent stability in "core inflation", with CPI ex food and energy remaining around 1.8% and providing support for a less accommodative policy. However the main driver of this stability is the rising cost of shelter. Core CPI excluding shelter is below 1% (YoY).

 


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Weapons of Economic Misdirection

 

Thoughts from the Frontline: Weapons of Economic Misdirection

By John Mauldin

“Measurement theory shows that strong assumptions are required for certain statistics to provide meaningful information about reality. Measurement theory encourages people to think about the meaning of their data. It encourages critical assessment of the assumptions behind the analysis.

“In ‘pure’ science, we can form a better, more coherent, and objective picture of the world, based on the information measurement provides. The information allows us to create models of (parts of) the world and formulate laws and theorems. We must then determine (again) by measuring whether these models, hypotheses, theorems, and laws are a valid representation of the world.”

Gauri Shankar Shrestha

“In science, the term observer effect refers to changes that the act of observation will make on a phenomenon being observed. This is often the result of instruments that, by necessity, alter the state of what they measure in some manner.

“It was, perhaps, the most unusual episode in the long running duel between the two giants of twentieth century economic thought. During World War Two, John Maynard Keynes and Friedrich Hayek spent all night together, alone, on the roof of the chapel of King’s College, Cambridge. Their task was to gaze at the skies and watch for German bombers aiming to pour incendiary bombs upon the picturesque small cities of England….

“Night after night the faculty and students of King’s, armed with shovels, took it in turns to man the roof of the ornate Gothic chapel, whose foundation stone was laid by Henry VI in 1441. The fire watchmen of St. Paul’s Cathedral in London had discovered that there was no recourse against an exploding bomb, but if an incendiary could be tipped over the edge of the parapet before it set fire to the roof, damage could be kept to a minimum. And so Keynes, just short of sixty years old, and Hayek, aged forty-one, sat and waited for the impending German onslaught, their shovels propped against the limestone balustrade. They were joined by a common fear that they would not emerge brave nor nimble enough to save their venerable stone charge.”

– Nicholas Wapshot in Keynes Hayek: The


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Comment by airvine

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  1. airvine

    TASR / Phil – (or anyone who caught it) could you please repeat the trade you outlined in the webcast today before your TOS crashed. Many thx, great webcast!







When Will The Fed Resume QE?

 

When Will The Fed Resume QE?

Courtesy of  

Primary Dealers were sellers last week in both the coupons and the futures as they continued to hold larger long positions in Treasury coupons than they have for several years. Conversely, their long position in the futures continues its downtrend of the past year, reaching a new low. They remain moderately long the futures, but they appear to be persistently selling futures into strength while they maintain a modest net long position in the coupons.

August is usually a month where Treasury supply pressures both stocks and bonds but this year Treasury supply was light. Lighter than usual supply should continue through September. This would normally be a bullish factor for both stocks and bonds. However, other sources of supply, or demand depressants, have pressured prices, particularly money destruction in commodities, emerging markets, and especially China.

As long as Treasury supply remains relatively light, tracking the various classes of buyers, particularly dealers, US commercial banks, and foreign central banks, will give us key insights into the outlook for both stocks and bonds. Supply may be a benign influence, but if buyers are pressured elsewhere, they’ll pull their bids and prices will decline. The longer that dynamic continues, the more likely it becomes that the US economy would weaken, the US deficit would widen, and Treasury borrowing would increase, putting more pressure on securities prices.

The issue at that point would be when would the Fed resume QE.

Shrinking Treasury Supply

Shrinking Treasury Supply

Subscribe to Lee's report as part of the Treasury Supply and Demand Pro Trader Weekly or Treasury Supply and Demand Investor Monthly on a standalone monthly or weekly basis.





News You Can Use From Phil’s Stock World

 

Financial Markets and Economy

Global markets are melting down (Business Insider)

Global markets are getting smoked again.

Dow futures are down 323 points, S&P 500 futures are down 40 points, and Nasdaq futures are down 93 points.

futures

U.K. Stocks Fall as Investors Weigh Data Showing China Slowdown (Bloomberg)

U.K. stocks declined as investors considered further indications that the Chinese economy is slowing down.

Bwin.party Digital Entertainment Plc dropped 1.5 percent after its takeover battle took another twist with a revised proposal from 888 Holdings Plc. BP Plc slid 1 percent as oil’s biggest three-day rally in 25 years stalled before U.S. government data forecast to show crude stockpiles expanded.

Dollar slides against yen as weak China data spur safe-haven demand (Market Watch)

The dollar slumped against the yen on Tuesday, as a fresh bout of weakness in global stock markets following weak Chinese data sent investors scurrying to the perceived safety of the Japanese currency.

The greenback USDJPY, -1.04%  fetched ¥119.59, down from ¥121.22 late Monday in New York.

A major warning from the most reliable bellwether of the world economy (Business Insider)

South Korean exports plunged 14.7% in August from a year ago. This was much worse than the 5.9% decline expected by economist. And it was the biggest drop since August 2009

This is a troubling sign as Korea's exports represent the world's imports. Because it is the first monthly set of hard economic numbers from a major economy, economists across Wall Street dub South Korean exports as the global economic "canary in the coal mine."

korea exports

China Said to Ask Brokerages to Boost Market and Buy Back Shares (Bloomberg)

China’s securities regulator asked brokerages to step up their support for share prices by contributing 100 billion yuan ($15.7 billion) to the nation’s market rescue fund and increasing stock buybacks, according to people familiar with the matter.

The China Securities Regulatory Commission gave the order on rescue-fund contributions at a meeting with representatives


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Getting Started – The Hardest Part of Investing

 

Getting Started – The Hardest Part of Investing

Courtesy of The Banker

Let's start at the very beginning, a very good place to start...

“Let’s start at the very beginning, a very good place to start,” sings my children’s favorite nanny-from-the-movies, Maria.

School started for my girls this week, so I’m in the mood for new beginnings. New school uniforms, freshly sharpened #2 pencils, and lined notebooks still unblemished with unicorn stickers.

Besides inheritance (obviously the very best way, because remember your first $5.43 Million arrives tax free!) the next two best ways for a person to get wealthy are investing throughout your lifetime, and starting a business.[1]

Neither of these two methods – slow-and-steady investing beginning at a young age or entrepreneurship – require extraordinary talent or prior knowledge. In fact, the biggest common barrier to both methods is simply getting started.

But how does one even do that? Let’s not under-estimate the difficulty of the “getting started” part!

discount_brokerage_firms

I have a reader who regularly emails me to the effect (I’m paraphrasing a bunch of his emails) “You need to tell everybody – especially young people – how to call up a brokerage company and how to buy their first stock or mutual fund. They don’t need special knowledge, they just need to get started now, contribute regularly, and never sell. And they’ll end up rich.”

Of course he’s right. You should all totally do this.[2]

Even so, many will resist the advice.

A managerie of discount brokers. Sadly, none of them pay me to list their brands

My question back to my reader: How do we get people to start at the very beginning?

I really don’t know how to fulfill my reader’s wish of inducing people to call up a brokerage firm, open up an account, and buy their first stock or mutual fund. I wish I had the words to express the importance of beginning, like, right now.

famous_goethe_quote_beginning

Goethe didn’t really say this, but…

The German writer Johann Wolfgang von Goethe didn’t really say, but…
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Re: the Death Cross

Michael Batnick studies the "death cross" and finds that the 50-day moving average crossing below the 200-day moving average is a short-term bad sign but post-death cross life is not as bad as the name suggests. 

Re: the Death Cross

Courtesy of Joshua Brown

Michael Batnick, our firm’s director of research, goes toe to toe with the Death Cross fixation among traders and the financial media:

On Friday the S&P 500 experienced what is known as a “death cross.” This is when the 50-day moving average crosses below the 200-day moving average and as you can guess by the name, is allegedly a negative signal for stocks moving forward.

A lot of work has been done to debunk the myth of the death cross and yet we continue to hear about it whether it’s in an index, a sector or a specific stock. Here are two reasons why it refuses to go away: 1) It sounds ominous, people love that and 2) over the last fifty years, a death cross occurred before each of the ten worst years. Not only did they appear but in eight of those ten years the indicator was quite timely, saving those who listened from further downside.

So if it identified the very worst years, wouldn’t it be foolish to dismiss this as a valid indicator?

Keep reading:

Beware the (stories of) the death cross (Irrelevant Investor)

Picture via Pixabay.

 





News You Can Use From Phil’s Stock World

 

Financial Markets and Economy

Summer's Over Get Smart on Cash Flow and Become a Very Serious Investor (Bloomberg)

In 1863, the Dowlais Iron Company had recovered from a business slump, but had no cash to invest for a new blast furnace, despite having made a profit. To explain why there were no funds to invest, the manager made a new financial statement that was called a comparison balance sheet, which showed that the company was holding too much inventory. This new financial statement was the genesis of [the] cash flow statement that is used today. In the United States in 1973, the Financial Accounting Standards Board (FASB) defined rules that made it mandatory under Generally Accepted Accounting Principles (US GAAP) to report sources and uses of funds, but the definition of "funds" was not clear. Net working capital might be cash or might be the difference between current assets and current liabilities.  — The Cash Flow Statement, Wikipedia.

selloff stocks marketsA big bank's glitch adds to confusion on Wall St. (CNN)

The past week has featured an unprecedented 1,000-point plunge for the Dow, dramatic stock market rebounds and mini-flash crashes for General Electric (GE) and some exchange-traded funds.

As if those events weren't enough, a technology glitch is adding to the confusion.

Dow posts worst August decline in 17 years (Market Watch)

The month of August can be pretty rough for stock investors. But this August has earned its place in the record books, as stocks were unsettled by uncertainty over the state of affairs in the world’s second largest economy, China.

As far as Augusts go, this has been the worst in nearly two decades for the Dow Jones Industrial Average DJIA, -0.69%

A service truck drives past an oil well on the Fort Berthold Indian Reservation in North Dakota, November 1, 2014.   REUTERS/Andrew Cullen  Stocks Fall, Oil Explodes Higher: Here's what you need to know (Business…
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Say Goodbye to Normal

 

Say Goodbye to Normal

Courtesy of James Howard Kunstler

The tremors rattling markets are not exactly what they seem to be. A meme prevails that these movements represent a kind of financial peristalsis — regular wavelike workings of eternal progress toward an epic more of everything, especially profits! You can forget the supposedly “normal” cycles of the techno-industrial arrangement, which means, in particular, the business cycle of the standard economics textbooks. Those cycle are dying.

They’re dying because there really are Limits to Growth and we are now solidly in grips of those limits. Only we can’t recognize the way it is expressing itself, especially in political terms. What’s afoot is a not “recession” but a permanent contraction of what has been normal for a little over two hundred years. There is not going to be more of everything, especially profits, and the stock buyback orgy that has animated the corporate executive suites will be recognized shortly for what it is: an asset-stripping operation.

What’s happening now is a permanent contraction. Well, of course, nothing lasts forever, and the contraction is one phase of a greater transition. The cornucopians and techno-narcissists would like to think that we are transitioning into an even more lavish era of techno-wonderama — life in a padded recliner tapping on a tablet for everything! I don’t think so. Rather, we’re going medieval, and we’re doing it the hard way because there’s just not enough to go around and the swollen populations of the world are going to be fighting over what’s left.

Actually, we’ll be lucky if we can go medieval, because there’s no guarantee that the contraction has to stop there, especially if we behave really badly about it — and based on the way we’re acting now, it’s hard to be optimistic about our behavior improving. Going medieval would imply living within the solar energy income of the planet, and by that I don’t mean photo-voltaic panels, but rather what the planet might provide in the way of plant and animal “income” for a substantially smaller population of humans. That plus a long-term resource salvage operation.

All the grand movements of stock indexes and central banks are just a diverting sort of stagecraft within…
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Have Peripheral Colds Caused a U.S. Recession Flu?

 

Have Peripheral Colds Caused a U.S. Recession Flu?

Courtesy of Wade of Investing Caffeine

tissue-box-1420439

At the trough of the recent correction, which was underscored by a brief but sharp -1,100 point drop in the Dow Jones Industrial Average, the Dow had temporarily corrected by -16.2% from its peak in May, earlier this year. Whether we retest or break below the 15,370 level again is debatable, but with the Dow almost reaching “bear market” (-20%) territory, it begs the question of whether the U.S. has caught a recessionary flu from the ill international markets’ colds?

Certainly, several factors have investors concerned about a potential recession, including the following: slowing growth and financial market instability in China; contraction of -0.4% in Japan’s Q2 GDP growth; and turmoil in emerging markets like Russia and Brazil. With stock prices down more than double digits, it appears investors factored in a significant chance of a recession occurring. Although the Tech Bubble of 2000 and generational Great Recession of 2008-2009 were no ordinary recessions, your more garden variety recessions like the 1980 and 1990 recessions resulted in peak to trough declines in the Dow Jones Industrial Average of -20.5% and -22.5%, respectively.

In other words, with the Dow recently down -16.2% in three months, investors were awfully close to factoring in a full blown U.S. recession.  Should this be the case? In answering this question, one must certainly understand the stock market is a predicting or discounting mechanism. However, if we pull out our economic thermometers, right now there are no definitive indicators sending us to the recessionary doctor’s office. Here are a number of the indicators to review.

Yield Curve Indicator

For starters, let’s take a look at the yield curve. Traditionally, in a normally expanding economy, we would normally expect inflationary expectations and a term premium for holding longer maturity bonds to equate to a positively shaped yield curve (e.g., shorter term 2-Year Treasuries with interest rates lower than 30-Year Treasuries). Interestingly, historically an inverted yield curve (shorter term interest rates are higher than longer term rates) has been an excellent leading indicator and warning signal for unhealthy stock market conditions forthcoming.

As you can see in the charts below, before the two preceding recessions, in the years 2000 and 2007,…
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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

In Parched California, a Farmers Market Is Emerging for Power (Bloomberg)

Californias record drought may be a boon to power companies.

Millennial investors are buying in volatile market (CNN)

But not the twenty-something newbies.

If anything, the young investors are doubling down, opening new accounts and buying stocks.

...



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Zero Hedge

Who Would Win World War 3? The Infographic

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

For those unaware, China is conducting a massive military parade on Wednesday to commemorate the 70th anniversary of the end of World War II.

The event - which is accompanied by a three-day public holiday - is important for Xi Jinping, who is keen to project China’s strength to the world, especially in the wake of the country’s economic deceleration and highly publicized stock market meltdown. 

Of course the parade also comes amid heightened tensions between Washington and Beijing.

China’s land reclamation efforts in the South China Sea - where the PLA has constructed nearly 3,000 acres of new sovereign territory atop reefs - has regional US allies on edge. The dispute came to ...



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Phil's Favorites

Beige Book Highlights: Will They or Won't They? Still Undecided?

Courtesy of Mish.

The Fed's Beige Book is a summary and analysis of economic activity and conditions, issued roughly two weeks prior to monetary policy meetings of the Fed.

"Book" is an adequate expression. This month, the Beige Book is 50 pages long. It's prepared with the aid of reports from the district Federal Reserve Banks.

Don't bother reading the book. It's not worth the slog. 

Beige Book Highlights

Bloomberg offers these Beige Book Highlights.
The Beige Book, prepared for the September 17 FOMC meeting, is not underscoring any urgency for a rate hike. Eleven of 12 districts report only moderate to modest growth with the Cleve...



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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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Kimble Charting Solutions

Long-Term bull market still alive, trend support is where?

Courtesy of Chris Kimble.

The S&P 500 is now down around 7% on the year. Is the very long-term bull market still in play? Yes it is!!!

The chart below looks at the NYSE Composite on a monthly basis, dating back to 1965.

CLICK ON CHART TO ENLARGE

As you can see, since the mid 60’s, the NYSE composite has remained inside of rising channel (A). The last time the top of the channel was touched was in the late 1990’s and the last time the bottom of the channel was touched took place back in 2009.

Despite the quick down turn of late, this long-term rising channel remains in ta...



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Insider Scoop

Look Beyond Q3 For This Digital Marketing Leader

Courtesy of Benzinga.

Related ADBE Benzinga's Top Upgrades Baird: Now's The Time To Buy Adobe The Vetr community has upgraded $ADBE to 4.5-Stars. (Vetr)
  • Shares of Adobe Systems Incorporated (NASDAQ: ADBE) have risen over 5 percent year-to-date.
  • Oppenheimer’s Brian Schwartz has initiated coverage of Adobe Systems with a Perform rating.
  • While expr...


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Chart School

Distribution Selling Returns

Courtesy of Declan.

After the late recovery last week, sellers again made markets their home. Sizable losses were accompanied with higher volume distribution, although volume was down on earlier panic.  Another pass at August lows looks likely.

The S&P is again heading to the 10% 200-day MA envelope. Relative performance is shifting away from Large Caps to more speculative indices, which is bullish in a rising market, but in a falling market suggests a lack of sanctuary.


The Nasdaq is also in the early stages of a retest of the August low. Technicals are weak, although stochastics crept above the bullish mid-line, but not enough to suggest ...

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OpTrader

Swing trading portfolio - week of August 31st, 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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Sabrient

Sector Detector: Finally, market capitulation gives bulls a real test of conviction, plus perhaps a buying opportunity

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

Courtesy of Sabrient Systems and Gradient Analytics

The dark veil around China is creating a little too much uncertainty for investors, with the usual fear mongers piling on and sending the vast buy-the-dip crowd running for the sidelines until the smoke clears. Furthermore, Sabrient’s fundamentals-based SectorCast rankings have been flashing near-term defensive signals. The end result is a long overdue capitulation event that has left no market segment unscathed in its mass carnage. The historically long technical consolidation finally came to the point of having to break one way or the other, and it decided to break hard to the downside, actually testing the lows from last ...



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ValueWalk

Some Hedge Funds "Hedged" During Stock Market Sell Off, Others Not As Risk Focused

By Mark Melin. Originally published at ValueWalk.

With the VIX index jumping 120 percent on a weekly basis, the most in its history, and with the index measuring volatility or "fear" up near 47 percent on the day, one might think professional investors might be concerned. While the sell off did surprise some, certain hedge fund managers have started to dip their toes in the water to buy stocks they have on their accumulation list, while other algorithmic strategies are actually prospering in this volatile but generally consistently trending market.

Stock market sell off surprises some while others were prepared and are hedged prospering

While so...



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Digital Currencies

Bitcoin Battered After "Governance Coup"

Courtesy of ZeroHedge. View original post here.

Naysyers are warning that the recent plunge in Bitcoin prices - from almost $318 at its peak during the Greek crisis, to $221 yesterday - is due to growing power struggle over the future of the cryptocurrency that is dividing its lead developers. On Saturday, a rival version of the current software was released by two bitcoin big guns. As Reuters reports, Bitcoin XT would increase the block size to 8 megabytes enabling more transactions to be processed every second. Those who oppose Bitcoin XT say the bigger block size jeopardizes the vision of a decentralized payments system that bitcoin is built on with some believing ...



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Pharmboy

Baxter's Spinoff

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

Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...



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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. 

Since...



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Promotions

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 jennifersurovy@yahoo.com 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.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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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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