Friday Follies – Marching Headlong into Earnings Season

Buckle up, it's going to be a bumpy ride!

We're 10 days into the third quarter and look how well things are going with almost every state having the virus under control except for a few idiot red states that think they are immune but, either way, the daily briefings and general public awareness have certainly turned the tide and….  what?  That's the chart from May?  Oh gosh, I'm sorry – let's take a look at the same chart as it is today thanks to our completely inept leadership:

Oh my God – get me out of this country!!!  What?  We aren't allowed to leave because we're too likely to be infected?  Inept is not the right word for our leadership then, is it?  "Contrary to the continued existence of American life" is a more accurate description for these morons, really.  You would think this is all some kind of plot to destroy America that was set into motion by a foreign Government, setting up a puppet leader who would send America spiraling down a path of division and destruction.   Nah….

The only good news here is the same good news I predicted back when Trump was first elected – this may be the end of the Republican Party – just like Herbert Hoover in 1929-1933 led to over 20 years of Democratic rule.  When Hoover was elected, the Senate had 56 Republicans and just 39 Democrats and the House had a 267-163 Republican majority and, just like they did 100 years later, they raped and looted the land and destroyed the economy and, just 4 years later, there were 59 Democratic Senators and just 36 Republicans and, in the House, there were 313 Democrats and just 117 Republicans and, by 1937, Republicans almost qualified for endangered species protection with only 17 remaining GOP Senators and just 89 House Members.

While it's still too early for the Democrats to throw Putin a thank you party for installing the Puppet of Doom for the GOP in the White Hosue, it's certainly looking like more of a Blue Tsunami than a "Blue Wave" is shaping up for the upcoming elections
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  • Thanks for you guidance – Your "student" will be passing on the McMuffins and having Lobster dinners tonight!

    Aquila

  • Phil, thanks for the webinar and options subject…I wasn't shown as attending but I was there for most of it. Your memory amazes me, your speed on the computer amazes me, your math skills blow me away. coke

    Coke

  • SPY/Phil, I took a big swing on January 26th following your advice to another member and bought 1615 contracts of Mar 185/190 BCS on SPY that will expire ITM today paying $290,700 on the $500k bet. I thought it might be fun to see what a winning trade looks like. Great call on your part and looking back it seems pretty obvious.

    Sibe14 (premium)

  • Hey Phil - writing to thank you! First of all, and I know you have heard this a few times form some others - the portfolio updates you have done - with entries and targets and even margin reqs are invaluable! I find myself understanding what is done here IN THEORY most of the time..however, there is a much bigger difference in placing and setting up the hedges properly than just understanding…This has been eye opening for me and Ifeel like I just took a major step in trading during the last week.

    Bcfla

  • Phil - I know I am small change compared to most others members, but I just wanted to let you know that during the last two weeks with the shorts you and others suggested I have 6 winners and 5 losers. My losers were small because I tried to follow your guidelines as best I could. On the other hand my winners on average were around 50%. Consequently, I am up $2000 in 14 days. Thank you for your patience and help. I think I am making progress getting rid of some of my poor trading habits of the past!

    DCalrk41

  • Phil is a fundamentalist to his fingertips. His ability to value a stock goes well beyond p/e, as he understands the essence of many businesses, what gives them value and how they make their money. As such, his recommendations are invaluable to a investor who takes a value-oriented approach.

    Zeroxzero

  • I would like to thank Phil and PSW crew for the insight and assistance (even the liberals). In December I initiated long stock positions buying stock, writing calls and puts in AAPL, WFR and CHK (scaling in and out). Over the last week I have been trimming back my positions selling stock and taking out my callers and putters. I am now back to my initial 25% position that I started with in December. However this time, my cost basis on shares AAPL, WFR, and CHK is $0! With money to spare from those positions.

    Texasmotion

  • In options trading, one must remain flexible with the ability to adjust to take advantage of the unexpected moves in the market. It is like chess - spend most of your time strategizing the next move. A good understanding of options is necessary to change direction and make adjustments as the market moves against you. I have a friend that honed his option skills while a member of Phil's elite membership over a period of two years. With the education acquired, he made over $2 Mil in that period, trading options and following the plays put on by Phil. If making money is your goal, then he is the go-to guy, as he knows option strategies better than anyone, and market timing is also a skill he has mastered.

    1234gel

  • I picked up one of your recommended Gold plays, the July ABX 30s and sold the Feb 35s, which are now mostly intrinsic value. Is it time to roll these to the March 37.50s, or should I wait this spike out?

    Bill Hoffman

  • The legendary Phil Davis has done it again with his call to "get out of the market now" (12/05/2017). Congratulations Phil, and while I am at it, I again would like to Thank You for your advise given me in March '09, when you said "unless you believe the world is coming to an end, then get in this market with both feet"...... and what a ride that was !

    1234gel

  • Phil Thank you very much, I appreciate your help and wisdom.

    CdsdpDean

  • 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

  • I have been around for many years now, was a modest inexperienced investor when I started, and I can honestly say I would not be at the point in my portfolio I am today without the guidance of Phil and JeanLuc and Yodi and all the others I've had the pleased of learning from and, on a few occasions meeting, over the years. Truly been a great experience.

    RPeri

  • Nice call on the QQQ puts this morning Phil. I bought 10 at .13 this morning for fun day trade. Just closed at .95. Sweet hedge for the day!

    RevTodd64

  • Way back did 20 of your suggested short BP Jan 11 26 P @ 4.3 now .85 — sold half. this am — paid for a years sub AGain!! thank you very much!

    Ban2

  • Phil: I have 263 positions - 70% in options ( balance stocks) in three portfolios with a value of 3 mil. YTD profit is about $750,000. Thanks!

    Gel1

  • Being on this board is better than successfully completing the Times crossword. Phil's panoply of comments manage to excite, illuminate, frustrate, exasperate, confuse, enlighten, outrage, invigorate and stupefy (and that's par for the morning session only!). But goddammit, it's addictive, informative and when it all goes right extremely profitable.

    Winston

  • Phil- great call in oil this morning! Now that Im no longer studying and am back in the real world I can only check this in the morning, at lunch, and after work. Anyways, you've been killing it on oil ( even more than you usually do) so I made a point to wake up extra early and made .25 off your ‘buy oil if you're brave'recommendation. It's nice to wake up and scalp 100+ bucks before I even start my real job. You lay those golden eggs everyday Phil! I thank you for that!

    Jromeha

  • Phil, I have to hand it to you. It seemed that you were the only person on the planet that thought stocks falling was still possible. I am glad I listened. About the end of the year I was really beginning to second guess though. Thanks for suggesting taking some profits last Nov. It no longer looks like I missed much.

    rj_jarboe

  • 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 - I LOVE these futures trades at random hours! I wasnt able to get in on the 612 part but if I had it wouldve been 130$ (2.6%) on a 5k contract in less than 30 minutes. I know you have to sleep, spend time with fam, ect but Im just letting you know that your posts after hours/late at night has made people who followed them a decent chunk of change. Thank you, we appreciate it!

    Jromeha

  • Phil - I celebrate today, having reached my goal for the year, trading in sync with your education and guidance, of 1 million in profit. I learned a lot, achieved much, and am profoundly grateful. To be honest, when I set the goal I thought it was daunting, as I have for many years been an investor in equities but did very little with options. Learning and doing has for me been a blast! I reached my goal by following Phil's strategies - lots of Buy/Writes, covered calls on equities , naked put entries for income production. I did it with 2.5 mil and kept 600,000 in cash in case I got in trouble. I concentrated on stocks (many of my own choosing) that had decent dividends and wrote front month calls against (OTM) which has worked well in this market run. 25% of my gain is in dividends and premium selling, with the balance in appreciation.

    Gel1

  • Don't expect to get rich quick here, but you can get easy 30 - 50 % per year, just by buying good stocks at discount (as we often discuss), selling monthly premiums of calls and puts.

    Tchayipov

  • Man, what a week: Bought C at 1.40, sold half at 1.59 (relatively big position), another quarter at 3.04 just now. Ran SKF down from 270 with one April put, still holding some 115's expiring in a couple days. I'm going to gamble this position like a champion Friday. Bought FAS at all sorts of levels and started cashing out. Long HOV, stock and some nickel calls for fun - Mocha up your buy-out from 5 to 8 and that's 10,900% return for the May-2.50's . Ha!

    Biodieselchris

  • Thx Phil. Lightly moving in the bullish direction. Took PFE for $14.35 and sold the Jan 11 C/P for $2.85 giving me a net entry below Mar 09 low. And I bought back those calls on BTU and JPM I asked about the other day and am leaving them uncovered for now, so feeling better. Still just learning the rhythm. In the three months I have been using your system, my little portfolio is up 9.9%, so not only am I learning, but I am APPLYING that knowledge, and it's paying off. Thanks.

    Hoss

  • Thank you Phil we appreciate all the work you put in to teach us valuable lessons about investing.

    Pat Swap

  • thanks for the DNDN recommendation last week phil. that was moneeeee….

    Kwan

  • Hey Phil – I ignored your call to sell those AAPL $580s for $1 so not sure whether to thank you or not (just kidding) for my $5 winner. Actually I want to thank you from the bottom of my heart, that was an uncanny call.

    TheChaser

  • Phil - I just referred 10 people. Last week was a 50% gainer for me. There are companies that want to sell mentoring service for thousands of dollars. This is far better of a deal with very good advice.

    Steve

  • Wow, Phil, we pretty much made your levels. Your levels: Dow 7,404, S&P 775, Nas 1,466, NYSE 4,839 and RUT 402 My sceen is showing: Dow 7,404, S&P 777, Nas 1,462, NYSE 4,868 and RUT 404

    Jordan

Not Crazy Can Still Be Nuts

 

Not Crazy Can Still Be Nuts

Courtesy of 

For a few years now, people have been comparing the rise of mega cap tech stocks to the late 90s. I think these comparisons are somewhat misguided.

I wrote those words in June 2018, adding “The gains have been extraordinary over the past five years, with Facebook, Apple, Amazon, Microsoft and Google growing from$1.2 trillion to near $4 trillion.”

Fast forward to today and the gains have been extra extraordinary, growing from $4 trillion to $6.5 trillion.

These 5 stocks now:

  • Represent 23.3% of the S&P 500
  • Are worth as much as the smallest 369 companies in the index
  • Are three times as large as the entire Russell 2000

And yet, even with this massive growth, in terms of overall returns, the tech bubble makes this period look quaint by comparison.

From April 2015 to today, $1 invested in the Nasdaq-100 grew to $2.42 (price only), compounding at 18.4% a year. In the dotcom bubble, $1 turned into $11.82 (at the peak), growing at 60% a year!

Perhaps one of the best-known companies on our list, Amazon.com, showed up with only 10 months’ worth of cash left in the till.

This is easy to laugh at now, but Amazon fell from a high of $113 to a low of $5.51. Like so many companies back then, their valuations were writing checks that their fundamentals couldn’t cash.

Valuations were obviously ludicrous back then and completely detached from reality, but at no point in time could you have used this to your advantage, at least on the way up. And the way up can last years, as we’re learning today.

The chart below shows the rise and fall for the multiple of earnings on growth stocks. Today’s stocks aren’t as crazy as they were back then, but…
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59,000 Thursday – Another Record High for Viral Infections

You're gonna be tired of so much winning! - Donald Trump CODE(KEEM ...Winning!  

As Trump predicted in 2016 we are so tired of winning at this point, aren't we?  The US is clearly winning the virus race with a record 59,400 infections on Wednesday – our 5th National Record in the past 9 days – WINNING!  On Tuesday we celebrated our 3,000,000 infection in the US and we're officially at 1% of the total population infected so that's 1/100 people carrying the virus (that we know of without adequate testing - which the President says causes more cases) and it remains airborne so see how well you do today avoiding coming in contact with 100 people or things that have been touched by 100 people….

There is a certain logic to "getting it over with" – they probably can't stop it from spreading, there is no miracle cure and we're all going to get it eventually so why prolong the agony?  Well, one reason is that hospitals are out of room for new patients and also out of supplies which means the virus can spread out of control when we try to treat infected people and more infected people means less room and less supplies and that will cause more people to die and not just from the virus but hospital staff is pulled away from other duties as well – endangering non-Covid patients.  

That is why we need to "flatten the curve".  The US already has one of the worst-performing Health Care systems in the World and this is a stress test we are clearly failing.  “It’s been chaos for us,” said Randy Bury, President of the Good Samaritan Society, which has struggled to keep its 200 nursing homes supplied with hand sanitizer, masks and gowns. “The supply chain in the United States is not healthy, and we’ve learned we cannot depend on the Government.”  

Trump has resisted using federal powers to address the problem, saying in March that individual governors should find their own gear because “We’re not a shipping clerk.” With the National Strategic Stockpile depleted, states have been left to fend for themselves, though the Federal Emergency Management Agency has been distributing modest shipments of gear to nursing
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“Just because you’re buying stock, doesn’t mean you’re an investor”

 

“Just because you’re buying stock, doesn’t mean you’re an investor”

Courtesy of 

Josh here – in the mid 1960’s, investors decided that there was a group of fifty growth stocks whose outlook was so bright that it didn’t matter what price you paid for them, as long as you were buying. By the early 70’s, they were learning a critical lesson about starting valuation – McDonalds, Coke and Procter & Gamble did indeed have a very bright future, but that didn’t prevent them from being cut in half. Investors in these names would have to wait for a decade or more to get back to even, despite having been right about the growth outlook.

Today’s enthusiastic buyers are wandering into a similar trap in many of today’s hottest growth stocks.

My friend Vitaliy Katsenelson wants to remind everyone that price matters and starting valuations will have an impact on an investors real returns over time. His excellent new post, about “one-decision stocks” can be read here.

Vitaliy also talks about why the current stock market situation more closely resembles Bobby Fischer’s “random” chess than the centuries-old original game. We talk Warren Buffett, the problem with airline stocks, the growth vs value paradigm and a lot more.

Be sure to subscribe to our channel so you never miss an update.

 





Which Way Wednesday – What Happened to Top Trade Alerts?

It's been a while since we had a Top Trade Alert.

Top Trade Alerts are the trade ideas we like the most in any given week, the ones we feel as very likely to do well and usually we are running with around an 80% success rate, which is amazing.  I often tell our Members that the reason we are so successful with our trade ideas and futures plays is not because we are so good at picking winners but because we are so good at NOT picking losers.  

When you decide to be a trader, professionally or as a hobby, you tend to sit down at your desk looking for things to trade but, like a good baseball hitter, the thing you have to learn is PATIENCE – if you don't wait for a good pitch, you are going to swing and miss a lot.  In baseball, it's just a strike but in trading, it's a loss!  

Home run hitters tend to strike out a lot because they swing for the fences and, while it's spectacular when they connect, many great home run hitters are terrible batters because that's all they do well while almost any player with an 0.300 batting average is going into the Hall of Fame.  An 0.300 trading average is not great, but, if you learn how to manage your money correctly, it can work but traders who can bat 0.500 (50%) and manages their losses will always get into the hall of fame.

Cardinals Strikeout GIF - Find & Share on GIPHYThe highest batting average in baseball history was Ty Cobb, who battet 0.367 but, because he didn't swing at pitches he didn't like, he also walked a lot and his "On Base Percentage" (times he got to first base) was an amazing 0.433 – almost half the time he got up, he got on base!  Being selective in your trades will also get you to first base (profits!) much more often but that, unfortunately, means there are certain times – or UNcertain times like these – when you are better off not swinging at all.  

While we were happy to buy stocks when they were cheap earlier in the year, there simply aren't too many bargains left and, so, not a lot…
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Up and Down

 

Up and Down

Courtesy of 

This stat from @SentimentTrader blew me away:

“The S&P 500 fund, SPY, has been up at least 0.5% for 5 straight days. That’s tied for the longest streak since its inception.”

I wasn’t taken aback because of how strong the markets have been recently, but that streak of five days sounded really small to me. I almost couldn’t believe it was right. But after looking at the data, the shock wore off.

The S&P 500 has gained >0.5% on 28% of all days (going back to 1993), so the likelihood of this happening 5 straight days is ~0.05%, or once every 2,000 days.

The other times this happened was 2011, 2009, 2008, and twice in 1999. With such a small sample size, there is no reason to think we know what happens next, but one thing that we know for sure is that all of these streaks occurred during periods of above average volatility.

Vol exploded on the way down and naturally has subsided on the way up. Although the market isn’t as chaotic as it was in the first quarter, you may be surprised to learn that the market is still swinging around more than it usually does.

The average absolute rolling 20-day change of the S&P 500, which for all intents and purposes is the same thing as standard deviation, hasn’t been below 1% since the end of February. For context, the median is 0.66%.

Investors have calmed down much more than the market has. The reason for this, stating the very obvious, is that volatility feels much better on the way up then on the way down.

As I’m writing this, the streak has ended, but the large swings continue. Stocks fell more than 1% today.

One of the silver linings to volatile markets is that they force us to learn or relearn our true tolerance for risk. And even if you’ve invested through periods like this before, sometimes we need a reminder of what risk feels like. 2020 has delivered this in spades.






 
 
 

Zero Hedge

Florida, California Suffer Record Deaths; Arizona Declared "World's Worst COVID-19 Hot Spot": Live Updates

Courtesy of ZeroHedge View original post here.

Summary:

  • Wisconsin sees biggest daily jump
  • South Africa sees another record jump
  • California reports record jump in deaths
  • Cali Gov holds press briefing
  • WHO begins 'independent' review of COVID-19 response
  • Italy bars travelers from 13 countries as cases creep higher
  • Arizona reports new cases
  • NYT names Arizona "world's worst COVID-19 hotspot"
  • Florida reports record jump in deaths, hospitalizations
  • Goldman: 40%...


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Phil's Favorites

Not Crazy Can Still Be Nuts

 

Not Crazy Can Still Be Nuts

Courtesy of 

For a few years now, people have been comparing the rise of mega cap tech stocks to the late 90s. I think these comparisons are somewhat misguided.

I wrote those words in June 2018, adding “The gains have been extraordinary over the past five years, with Facebook, Apple, Amazon, Microsoft and Google growing from$1.2 trillion to near $4 trillion.”

Fast forward to today and the gains have been extra extraordinary, growing from $4 trillion to $6.5 trillion.

These 5 stocks now...



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The Technical Traders

Retail Traders & Investors Squeezed to Buy High-Risk Assets Again

Courtesy of Technical Traders

Yes, we certainly live in interesting times.  This, the last segment of our multi-part article on the current Q2 and Q3 2020 US and global economic expectations, as well as current data points, referencing very real ongoing concerns, we urge you to continue using common sense to help protect your assets and families from what we believe will be a very volatile end to 2020.  If you missed the first two segments of this research article, please take a moment to review them before continuing.

On May 24th, 2020, we published this ...



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Biotech/COVID-19

When Trump pushed hydroxychloroquine to treat COVID-19, hundreds of thousands of prescriptions followed despite little evidence that it worked

 

When Trump pushed hydroxychloroquine to treat COVID-19, hundreds of thousands of prescriptions followed despite little evidence that it worked

As public figures and some in the media touted hydroxychloroquine, prescriptions skyrocketed. Grace Cary / Moment via Getty Images

Courtesy of Richard L. Kravitz, University of California, Davis

In late March and early April, ...



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ValueWalk

How To Help Employees Thrive, Even When Their Career Goals Are Uncertain

By Ed Mitzen. Originally published at ValueWalk.

These uncertain times filled with racial unrest, a global pandemic, massive unemployment and economic anxiety have caused some people to reevaluate their lives and their priorities. Within that introspection, there are a few potential outcomes, whether it’s reassessing career goals, losing sight of them, or coming to the realization that some workers are happy in their job and do not aspire to a higher position.

Q2 2020 hedge fund letters, conferences and more

Whether a worker likes the road they are on or sees a fork in it approaching, company leaders who want to keep valued...



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Kimble Charting Solutions

Tech Experiencing A 20-Year Breakout, While Small Caps Are Near 20-Year Lows!

Courtesy of Chris Kimble

Successful investors are often rewarded by owning strength and avoiding weakness.

Could two key sectors be experiencing 20-year strength and weakness extremes at the same time? Yes!

The NDX 100/S&P ratio (left above) is currently experiencing a 20-year breakout at (1).

At the same time, the Russell 2000/S&P ratio is near 20-year lows at (2).

This 2-pack reflects that the place to be at this time continues to be Tech...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.



Date Found: Saturday, 14 March 2020, 05:51:16 PM

Click for popup. Clear your browser cache if image is not showing.


Comment: Crash in perspective - its Bad, and not over!



Date Found: Saturday, 14 March 2020, 07:49:29 PM

Click for popup. Clear your browser cache if image is not showing.


Comment: The Blood Bath Has Begun youtu.be/bmC8k1qmM0s



Date Found:...

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Lee's Free Thinking

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

 

These Charts Show COVID 19 Is Spreading in the US and Will Kill the Economy

Courtesy of  

The COVID 19 pandemic is, predictably, worsening again in much of the US. Only the Northeast, and to a lesser extent some Midwestern states, have been consistently improving. And that trend could also reverse as those states fully reopen.

The problem in the US seems to be widespread public resistance to recommended practices of social distancing and mask wearing. In countries where these practices have been practi...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

...

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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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...

Learn more About Phil >>


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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.