Why We Can’t Handle An Equities Bear Market, Part 1: State Budgets Will Implode

Courtesy of John Rubino.

Back when society’s balance sheet was reasonably solid, the occasional bear market was no big deal. A 20% drop in the average S&P 500 stock would scare investors and lead to slight declines in consumer spending and government capital gains tax revenue, but the overall economy would barely notice such a minor speed bump.

But that was then. Like a person with an impaired immune system, today’s developed world is so highly leveraged that a shock of any kind risks catastrophic complications. This is why governments and central banks now meet every incipient crisis with quick infusions of newly-created cash and lower interest rates. We can’t risk letting markets be markets any more.

Among the many things that might go wrong if equities fluctuate normally, state and local budgets that depend on capital gains revenues and sales taxes (both of which tend to fall in bear markets) would take a potentially serious hit. From today’s Bloomberg:

Recovering U.S. State Budgets Run Headlong Into Stock Declines

The gradual recovery of U.S. state budgets, which collectively anticipated 3.1 percent more revenue this year, may be reversed by stock market declines that imperil income taxes, their largest source of money.

Since 2011, states have been restoring education, health care and other programs slashed during the recession, and the trend was forecast to continue this year, according to the National Association of State Budget Officers in Washington.

Monday’s 3.9 percent decrease in the Standard & Poor’s 500 Index, continuing the index’s worst downturn since the financial crisis in 2009, spells trouble for states like California whose reliance on capital-gains taxes makes them vulnerable to swings in equity markets. The market correction comes after a rout in oil prices that has stung states including Alaska and Texas that rely on revenue from petroleum production.

“Before the last week-and-a-half or so, states have been in the best relative fiscal health since the end of the Great Recession,” said Arturo Perez, fiscal program director for the National Conference of State Legislatures in Denver. “This is a big game of wait-and-see.”

In surveys of fiscal officers from all 50 states conducted between February and April, the budget officers group found that


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Phil… My portfolio, in the past few months, has acheived a high degree of stabilization. I've noticed that on up days, down days, even days, it doesn't matter, my portfolio rarely varies more than 2%. And over the long haul it just slowly increases in value. I attribute this not to investment choices, but to style. Thanks to you and others on this site I'm paying close attention to position size, delta neutrality, downside protection, and concentrating on selling premium rather than buying it. I've developed increasing patience, not having to trade daily, or even weekly. I'm concentrating on the finer points of trading, letting the profits come to me, rather than the other way around. I appreciate the help everyone here has given in getting me focused on this principle. I'm pumped!…in a calm sort of way.

- Iflantheman


Thanks, Phil!!! I just crushed today with it with silver (SLV) calls today, thanks to your persistent reminders of how ridiculously cheap it has become, and watching my TSLA this week $240 puts dissolve into chump change added an extra note of amusement.

- Zeroxzero


Phil/BCS - Didn't realise they traded here. Should've known really. Thanks for the tip. managed to pick some up just before the close at a 15% discount to the UK closing price.

- DB


It is amazing how much confidence you engender, Phil………..I knew the 1% a day trades and repeated often were possible as I had done in stretches, and I knew kill zone trades were also possible and 5% to 10% returns per month were very possible with practice, experience and smart risk management all without having to take a lot of risk, but I guess I was talking to the disbelievers and since I have dropped them into my 'why bother to try to explain it' file and come over to the dark side at PSW I feel soooo much more content not only with the returns, but with the company and a comments and the obvious opportunity to learn and learn and learn some more. It all helps the mental and emotional discipline of the trading too. So thanks again.

- Roro


On Optrader's section yesterday he was asked how he works with AAPL as an investment. He replied that he just ‘plays with the covers'. I've got a separate portfolio where I use primarily this technique over the past 6 months. Up 60% The principles involved are stock selection, patience, patience, using covers to protect profits, rolling covers to maximize premium return, and exiting when covers are gone and stock price is high. Sometimes it's hard to remember where you learn to do this stuff, but much of it is from integrating principles I've learned here with thing I already knew. Thanks for the help on this, Phil and others.

- Iflantheman


The strategy you have laid out pretty much mirrors much of my trading activity. I also mix in some momentum plays and "drop dead" bargains that come across my radar. My YTD trading profit is 63%. Back in March when Phil said "unless you think the world is coming to an end, then NOW is the time to start taking positions in Buy/Writes with the VIX so high." I jumped in with both feet - ( thanks, again Phil)

- Chaps


I love it when a trade really comes together. After 4 DD's and a roll, I cashed out 16 times my initial position in TLT today for a 140% gain. Thank you Phil for the lessons in scaling in, and paying for position.

- 2Can


Started my membership in mid-Oct and have since then learned so much about options by reading the site's articles and postings, members' chats and suggested trades – as a bonus, the articles are entertaining as well! Phil's long-term investing strategy makes really good sense as I've seen its effect on my GLW positions. Phil – thanks for sharing your knowledge of the market! I've worked as risk analyst for the investment dept of a $19B insurance company, and the scope and depth of your daily commentaries blows away what I have seen and heard from the PMs and even the chief investment officer! Most of all, I will continue to be a member because you have your priorities right (from my POV) – it's not all about money and power.

- Bai2r


Phil, i wanted to thank you again for helping me protect future stock allocations at work - finally, i feel like i am owning my own destiny with stocks vs. letting the market dictate what you get – thanks again.

- Nramanuja


Thank you so much for the good daily news in review Phil. I love your commentary! It is such a breath of fresh air in the smog cluttered news networks.

- RJRoberts


Phil.... I remember back in March of '09, you stated " Unless you think the country is going to hell in a hand-basket, NOW is the time to do your buying". Do you remember ? I took your advice, and bought leap $2.00 calls on F, approximately 200,000 shares using the options, for just pennies. Now that was the best Ford I ever owned.... made over $1 mil - thanks go to you Phil. I now drive a Mercedes but still "love" the Ford.

- 1234Gel


Why were the analysts wrong? If I were a Japanese investor who purchased US stocks prior to November at Y80 yen to the dollar, with the US market up an average of 15% or more and upon selling the asset I covert dollars to Yen, also realizing an additional 25% gain (one dollar now converts to 100+ Yen rather than the 80 I used at time of purchase), I think I would be unloading US assets also. But analysts never do the math in their articles nor very rarely bring up or discuss the ramifications of currency fluctuations. I don't include Phil in this group as this is a valuable lesson I am learning from him.

- Denlundy


BTW Phil, I wanted to relate a conversation I had with my business partner yesterday. I told him that I have been much more relaxed about my investments ever since I joined your site. It's funny how a 15-20% cushion does to your nerves. My returns have increased dramatically and my risk diminished. Many thanks for the guidance and patience. Good thing I am doing better financially as you might have increased my life expectancy as well!

- StJeanluc


Phil...The hundred grand portfolio updates are helpful...Fun ..and have been profitable...really like em... made some nice entries into USB, KEY today... and I better add those FAZ calls tomorrow... Really glad you put that up this morning...

- Becker


Phil I have been applying your arsenal (matresses, Edz plays, Ugl verticals etc.) to my gold holdings . So a big thank you for "teaching me how to fish" rather than just giving me the fish...

- Magret


I enjoy your informative materials, Phil... as it is obviously beneficial to so many "styles" of trading the markets... long term, swing or day trading the market moves. As a longer term trader, I really like you long term calls, as I for one recognize the difficulty of calling these, because the further out you go in time, projecting price movement becomes more difficult. I have to congratulate you for your accuracy... You called the March 2009 market upward reversal almost to the day, and the AAPL reversal to THE day. Only one who has been a student of the economy and the markets over a period of time could have done this, and so many other accurate calls. I'm sure it was difficult and consistent work, but it did pay off... thanks from one who benefited big time !

- 1234Gel


Phil: Once again thanks for those inciteful comments, and the old links to Sage's portfolio management (I hadn't read before). I'm an experienced stock trader, but over the last 3 or 4 months have come to appreciate options trading here at PSW, and the consistency of your many premium-selling strategies. It is liberating to have to worry less about getting direction right and being able to generate 5% MONTHLY returns with close to delta-neutral positioning. Much appreciated!

- Neverworkagain


Phil/ I hope the next 5 year bear market will be as much fun and as profitable as this 5 year bull market. For those who survived 2008/2009, and who imbibed the wisdom of PSW, what a time it has been. Good to have you by my side. I think you are selling yourself short – you need to triple your prices :)

- Winston


GIVE THANKS/PHIL Have not done my 10,000 hours, but a couple of years at PSW, and moved from fishing with a single line to owner of a commercial trawler (metaphorically speaking). Now I fish with many lines. It is amazing when you go over the same information time and time again, eventually it clicks. Like planting trees; being the house, 20% sale items, selling into the excitement. and patience. I just sold an AAPL Jan 12 340/390 BCS financed by the sales of Jan 12 275 Put. The trade was put on one year ago for a net credit and exited five minutes ago for a 49 dollar per contract profit. No point in waiting till opex to see what happens, and I will just sell 10 of those VLO puts to make myself net the round 50. I no longer worry about opex coming as I have adjusted well in time for most positions that go against me. I still make some howlers (RIMM, TBT, TRGT) but I play the percentages and my winners outdistance my losers by many miles. I would never be in this position if it were not for Phil. He is a treasure, pure and simple. The goose that lays the golden egg if we care to listen and practice. Phil, a mighty big thank you.

- Winston


Phil – I think I finally figured out your "crystal ball" time frame. You're about 5-14 days AHEAD of what the market is going to do. It's taken me a long time to realize this, but boy it's been profitable. I go in when you recommend something at about 25% allocation, and then add to it each day it "goes the wrong way" Then BOOM, one day it's all good…. The long put list was literally exact in it's timing.

- Burrben


I have followed along with your commentary and alerts and have been flabbergasted at your quick analytical skills and your journalistic skills to explain it clearly. In a little over three weeks I have cleared almost 1000.00 dollars and got an intensive education at the same time. I would like to immediately upgrade my membership.

- TokyoLife


Phil/Everyone here/Thank you - What everyone here with their insightful comments (including yourself) has helped me with is that I'm greatly increasing my ability to trade more psychologically neutral, although I've got a ways to go. Two years ago I'd wake up early and my heart would race if futures weren't pointing exactly how I wanted… I've noticed an exponential leap in my discipline skills especially over this past two weeks. The old me would have ran with that trade for profits without even asking. Now I know that there are ALWAYS more trades and that I have PLENTY of options to turn a bad trade even. Also, it's more logical and less emotionally draining which lets me focus my faculties on my wife, college, my job, and studying for the ol' Series 7. Would it be safe to say that one of the most important skills to develop is the ability to adjust? I'd love to get to the point where I can look at a bracket and know, for example, what I need to sell for cover in what month in order to get my desired results. Both COF and my past DMM venture have been excellent learning experiences. Thanks, everyone. I look forward to further lessons.

- Skasiah


Phil, did you by chance publish the weekly webinar on Youtube yet? I have been watching these and they are awesome. Unfortunately, I can't cut out of work to attend live webinars. Again, they are just awesome content – thank you.

- jcpdx


I think that Phil is super, I am up 39.3% YTD. Thank you for your kindness and the opportunity to observe Phil from February.

- KMisko


Happy Thanksgiving Phil and to your family and associates. Also to all of the other fellow citizens of Phil's Stock World. I am particularly happy and thankful that I clicked on your article in Seeking Alpha a number of years ago. That opened the gate to Phil's Stock World and "being the house". My wallet thanks you as does my peace of mind in trading options, stocks and rarely futures. Your liberal views opened up my views—being a boot strapper (pulled myself out of a poor background) I was a CONSERVATIVE—cynical of others who weren't as driven. Now, I am much less so; you have taught me more than how to make money and manage risk. So, again I give thanks to you and the others of PSW!!

- Newthugger


1,000% on SKF - It was a freakin' monster into the center field bleachers! I saw it play out live and squawked it from the StockTwits ID which 14k people follow: Home run trade of the week @philstockworld just knocked cover off ball w $SKF puts. http://bit.ly/piBL Great trade bud!

- Phil Pearlman - StockTwits


I have been a member of Phil's site for three years and counting, and my advice is that all investing takes time. There are o shortcuts, no secret way to riches. Same with Phil's site- you need time and patience to start benefitting fully from his advice. But it is often spot on and also very useful, especially to me as I try to keep a level head in this turbulent stock market environment.

- Jordan


Thanks Phil for helping make this a much, much better year this year than last. Your tutelage has been so very helpful. Don't think I can say Thanks enough. And I thanks all the members here who were work hard in helping us all to become better traders, and I would say better people as well. The support many of you offered when we evacuated during the fire this past year helped me immeasurably. Happy New Years to you all!

- JBur


Phil: I am always able to figure out your trades, including the rational when put in the right context of previous comments, etc. Keep doing what you're doing. It is much appreciated, and invaluable. Your hit rate of successful trades has been very high in my 1.5 months as a member, but even more importantly is your teaching of how to repair and DD positions that haven't gone your way yet. As with most members, we all have our ‘pet' trading interests, and learning how to think about trading is much more important than a specific trade, which could see the conditions behind it change an hour later. This is the classic case, of ‘Teach us to Fish', rather than just giving us a fish once in a while. Thank you!

- Neverworkagain


Sold out my AAPL mar95 calls. Up over 100% today on them!

- Singapore Steve




Yesterday’s Trade Ideas Are Up $18,400 – Today it’s 3% Index Gains or Bust!

We need 3% gains today.  

That's right, after dropping 15% our 5% Rule™ says a weak bounce should be 20% of the drop and that's a 3% bounce off yesterday's close just to keep us a tiny bit bullish and, thanks to China's expected market save (more on that later), we're getting it pre-market.  We already played for these bounces, of course – as I noted in yesterday's morning post, we wanted to go long in the Futures at:

  • Dow 15,840 (/YM), now 16,320 - up $2,400 per contact 
  • S&P 1,850 (/ES), now 1,946 - up $4,800 per contract 
  • Nasdaq 4,000 (/NQ), now 4,200 - up $4,000 per contract 
  • Russell 1,080 (/TF), now 1,152 - up $7,200 per contract  

That's $18,400 (per contract) in gains from our suggestions in yesterday's morning post.  Whatever you do DO NOT SUBSCRIBE HERE or you will get useful information like that sent to you pre-market every day.  Of course, those gains are nothing compared to the shorts we abandoned at the same levels from last week's Live Trading Webinar, where we featured a short on the Dow Futures at 17,477 which were up $8,185 per contract at our target low of 15,840.

I was the first person to hash-tag #BlackMonday (which trended), tweeting it out at 5:05 am, long before the Futures fell off a cliff.  We expected the sell-off due to lack of China intervention and, by the time I was writing the 8:20 post, we did a very good job of calling the bottoms but, at 9:42, in our Live Member Chat Room, I said:

I think this is almost a flash-crash.  Someone (thing) is selling with abandon.  I think since we wanted to grab a long, we should and I nominate Dow at 15,600, which is more than 10% down for at least a bounce and the DIA Sept $155s at $6.75 were $13 on Friday and I like them for a gamble with the intention of selling the $159s for $6 on a bounce (now $5.20) so 20 of those for the 5% Portfolio with a stop at $6 or if the Dow can't hold 15,600. 


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The Art of Catching Falling Knives

[The art of catching a falling knife should be practiced with a helmet and very thick gloves!]

The Art of Catching Falling Knives

Courtesy of Wade of Investing Caffeine

Knife Falling FreeImages

“In the middle of every difficulty lies an opportunity.”  ~Albert Einstein

It was a painful week for bullish investors in the stock market as evidenced by the -1,018 point drop in the Dow Jones Industrial Average, equivalent to approximately a -6% decline. The S&P 500 index did not fare any better, and the loss for the tech-heavy NASDAQ index was down closer to -7% for the week.

The media is attributing much of the short-term weakness to a triple Chinese whammy of factors: 1) Currency devaluation of the Yuan; 2) Weaker Chinese manufacturing data registering in at the lowest level in over six years; and 3) A collapsing Chinese stock market.

As the second largest economy on the planet, developments in China should not be ignored, however these dynamics should be put in the proper context. With respect to China’s currency devaluation, Scott Grannis at Calafia Beach Pundit puts the foreign exchange developments in proper perspective. If you consider the devaluation of the Yuan by -4%, this change only reverses a small fraction of the Chinese currency appreciation that has taken place over the last decade (see chart below). Grannis rightfully points out the -25% collapse in the value of the euro relative to the U.S. dollar is much more significant than the minor move in the Yuan.  Moreover, although the move by the People’s Bank of China (PBOC) makes America’s exports to China less cost competitive, this move by Chinese bankers is designed to address exactly what investors are majorly concern about – slowing growth in Asia.

Yuan vs Dollar 2015

Although the weak Chinese manufacturing data is disconcerting, this data is nothing new – the same manufacturing data has been very choppy over the last four years. On the last China issue relating to its stock market, investors should be reminded that despite the massive decline in the Shanghai Composite, the index is still up by more than +50% versus a year ago (see chart below)

Shanghai Composite 8-2015

Fear the Falling Knife?

Given the fresh carnage in the U.S. and…
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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 October! Many had predicted that the longer we go without a meaningful pullback, the harder and scarier it would be when it finally broke down. In addition, program trading kicked in to deleverage positions, with preset algorithms exacerbating the selling and volatility.

Actually, there are four main issues creating uncertainty for investors: China’s true growth outlook, commodity prices, the Federal Reserve’s plan for rate hikes, and the upcoming corporate earnings season. But all is not lost, and a capitulation event like this also provides a healthy cleansing, providing the opportunity for capital to transfer from weak to strong hands, and now there is suddenly a lot of room to the upside — if bulls can keep their composure and regain their conviction.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.

Market overview:

With signs of slowing growth reducing demand from China, coupled with further devaluation of the yuan, other exporting nations are racing to debase their currencies in order to stay competitive. But as I discussed last week, the devaluation of the yuan (which is pegged to the dollar and thus must manually adjust the valuation) pales in…
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Black Monday for the Markets – China Fails to Hold the Line

People are starting to FREAK OUT!  

It's been so long since we've had a good old-fashioned market correction that many "investors" think the World is ending and are selling everything that isn't nailed down.  Of course, in some cases they are right – especially if they are the kind of momentum chasers who piled into Netflix (NFLX) at over 250 times earnings or Tesla (TSLA) about the same or Amazon (AMZN) at 100 time earnings as they looked to carnival barkers like Cramer and Co. to hit the noisemakers and tell them how wise they were for following all the lemmings off a cliff.  

Skip to the last four minutes of this interview from last Wednesday Morning, where I explain why Netflix was our top choice for a short, now 25% ago and I also called for a 10% market correction, now (including the morning's futures) 8% ago.  That morning, we were also shorting the Dow Futures (/YM), which were at 17,000, Russell Futures (/TF) at 1,205 and Nasdaq Futures (/TF) at 4,525 using the strategies we had discussed at the end of July in: "Using Stock Futures to Hedge Against Market Corrections."

Aside from the Dow contracts now up $5,500 at 15,900, Russell contracts gaining $8,500 at 1,120 and Nasdaq Futures gaining $10,500 at 4,000, we also suggested bullish play on gold that has already jumped 30% in two weeks.  Even in this downturn, I was able to point out to our Members early this morning that there was a good entry on Gasoline Futures at $1.33 on the /RBV5 contracts (Sept) and we're already back at $1.345 for a $650 per contract gain.

As noted in "Using Futures..", there are ALWAYS opportunities to pick up nice gains in the Futures market, no matter which way things are going.  I also sent out an alert to our Members with Technical Analysis of the current market conditions and you can see it on Twitter (our 5:05 am tweet) if you'd like – as I won't rehash it here other than to say our expected 10% correction is right on track. 

Looking over at our Big Chart, 1,942.50 is where we think the S&P will settle out but
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Futures Stumble Out Of The Gate, Slide 0.6% On Lack Of Chinese RRR Cut: What Happens Next?

Courtesy of ZeroHedge. View original post here.

On Friday, ahead of the closing stock rout, we forecast that the biggest risk for anyone staying long over the weekend was a disappointment out of China, where the sellside had gotten so excited that a 50-100bps RRR cut was imminent, that the lack of one would surely send futures sliding.

Sure enough, as we noted earlier today, much to everyone's surprise and disappointment, the PBOC did nothing (for reasons we speculated upon earlier).

Which bring us to this evening's S&P futures, which opened for trading minutes ago, and as expected gapped by over 0.6% after the Chinese disappointment, down 19 points to 1952 and looking quite heavy as several key support level as in the crosshairs.

The key carry driver for all US equity action, the USDJPY, is not looking too healthy either and just hit its lowest level since July 8 as the Yen is soaring on carry trade unwinds:

To be sure, the real action in tonight's illiquid market will not be in US futures, at least not until Europe opens, but in China, where it will be up to the "National Team" to prevent a massive rout now that the PBOC has told stocks they are on their own for the time being..

Also keep an eye on crude: after an initial gap lower the black gold is trying to stabilize the drop. Perhaps it is waiting for Gartman to confirm he is still long before crashing below $40.

So what happens next? It's clearly anyone's guess so here courtesy of Bloomberg is a selection of quite a few guesses and what some pundits, many of whom predicted smooth sailing unttil year end, are suddenly and very dramatically changing their tune.

  • “It’s going to be pretty deep. … We’re in the camp that this is not yet a big move. It’s scary, and those last two day trends look


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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

U.S. stocks set for bumpy end to a wild week (CNN)

After some of the wildest days on markets in recent memory, the weekend can't come soon enough for many. Panicked selling Monday and Tuesday gave way to a scramble to buy Wednesday and Thursday.

While Many Panicked, Japanese Day Trader Made $34 Million (Bloomberg)

While a lo...



more from Paul

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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Zero Hedge

Joe Biden's Son Blames "Russian Agents" For Ashley Madison Profile

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Last night we heard the best 'excuse' yet if you are caught with an Ashley Madison account, from Dan Loeb - "due diligence." Today, not to be outdone by a married hedge fund manager, Vice-President Joe Biden's son "Hunter" has unleashed his own set of excuses for member ship of the extramarital affairs website, as Breitbart reports  - Biden thinks international agents, possibly Russian, who objected to his board membership ...



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Kimble Charting Solutions

Dangerous Place for a kiss of resistance, says Joe

Courtesy of Chris Kimble.

Anyone noticed its been a wild week? Has anything been proven with all the volatility the past 5-days?

What happens at (1) below, could tell us a good deal about what type of damage did or didn’t take place this week!

CLICK ON CHART TO ENLARGE

The large decline on Monday cause the S&P 500 to break support of this rising channel.

The mid-week rally pushed the S&P higher and as of this morning it is kissing the underside of old support as resistance now, near the 50% retracement level of the large decline over the past few weeks.

Why could th...



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Phil's Favorites

The Troubling Decline Of Financial Independence In America

Courtesy of Charles Hugh-Smith, Of Two Minds 

By financial independence, I don't mean an inherited trust fund. I mean earning an independent living as a self-employed person. Sure, it's nice if you chose the right parents and inherited a fortune. But even without the inherited fortune, financial independence via self-employment has always been an integral part of the American Dream.

Indeed, it could be argued that financial independence is the American Dream because it gives us the freedom to say Take This Job And Shove It (Johnny Paycheck).

This chart shows the self-employed as a percentage of those with jobs (all nonfarm employees). According to the FRED data base, there are 142 million employed and 9.4 million self-employed. (This d...



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Chart School

Shorts Rally - But For How Long?

Courtesy of Declan.

A second day of gains keeps pressure on shorts in squeezing them out of their positions, but is also looking to sucker shorts into trying to second guess when this rally will end.

The S&P is heading fast towards 2,044. Given the speed at which it has enjoyed this advance it will be there by Tuesday! In reality, it will likely slow before it gets there. When markets do head lower it will be important they do so slowly to sow further doubt into shorts.


The Nasdaq will be testing resistance tomorrow, and is close to coming up against its 200-day MA.  Those who bought the low will be very happy.

...

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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 ...



more from Sabrient

OpTrader

Swing trading portfolio - week of August 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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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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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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