Archive for 2006

Weekend Update

This is just me taking notes on my reading so please excuse the totally random nature of this column but it was very popular last time I rambled on like this:

Just in case you didn’t think our government does anything useful, check out this very nicely written set of oil articles by the FTC, which gives a great overview of the major market factors:

The WSJ has a leading article that the “Fed sees inflation rise as Fleeting.” Wow, I have to start shopping where they do!


GMCR is consolidating for a breakout if it can get itself above $40. They had one of those quarters that was better than it sounds because they had a .08 loss on the investment in Keurig before the acquisition and another .02 in amortization expenses causing earnings to be a penny lower than last year’s .26. There was also a charge of $400,000 for stock option compensation compared to none the year before. If this is an anomaly rather than a trend, things are looking very good indeed!

The company was up 17% last year and Q1 was a 20% increase and this quarter has 21% more sales than Q2 ’06 but this is nothing yet as they only just began rolling out their Newman’s Own Oganic Coffee (you didn’t think Paul made it did you?) through McDonald’s who also began a test program of iced coffee in May.

They also just got deals with Sam’s club and Target so maybe my wife doesn’t have to drive to Vermont anymore to buy the stuff. SG&A shot up but that is to be expected with an aquisition and all this new sales activity, pay them more I say if they can deliver those results every quarer…

All those one time charges and increasing expenses and higher taxes caused the company to lower guidance significantly from $1.19 to $1 for ’06 but they left ’07 estimates at $1.54 so this really is just a growing pain if anything (I think they are wrong about their own business and will blow away estimates).

Sadly, this is not an optionable stock or I would be loading up the truck but I would look to buy this one for the long haul, hoping for a pullback to maybe $35 but not counting on it. I would buy above $40 and watch for the 50…
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Dollar Daze

I’m back to pondering the dollar and our place in the world. The dollar is down 4% since 7/17 and looks like it could be heading down another 5%, which I can virtually guarantee if the Fed pauses. Perhaps this is what’s keeping oil alive as it has dropped 6% during that same time and the little bounce it took this week off a 10% dollar-adjusted correction makes sense in that light. So had the dollar not died, we would have been looking at $71 oil right now, well on the way to testing the adjusted 200dma of $70. I know it makes your head spin but think of it like this: If the dollar is 4.5% off it’s 200 dma then you need to move the ma of global commodities up 4.5% or value the commodity down 4.5% (same thing in a chart) to get a true idea of where you are. One of the first things I will do when I start a fund is get a nice computer model of this sort of thing as no one else seems to look at things this way. You can also, to a lesser extent, use the same logic to apply to the price of global stocks like Toyota, Total, Exxon or Google as they are widely enough held to have the net effect of costing US purchasers more on a weak dollar. So with oil stocks we have the double whammy of the commodity being held up by the declining dollar along with the stock becoming more expensive for the same reason. In that light, we have oil down 10% since the 17th, when it and the dollar peaked and has taken a Fibonacci 36% bounce before heading back down to retest 10% ($72.50) next week. As oil was at $69 mid June when the dollar was 4% higher, we can reasonably assume that $74 represents a 50/50 mix of dollar decline and the additional impact of the newest war (#3 on the charts with a bullet, already zooming past Chad and Nigeria in the international news and possibly on the way to passing Afghanistan). With the Fed Funds predictors at 80% on pause I’m looking for a surprise hike to boost the dollar, kill the markets and send oil back below $70 but that’s only going to work if we don’t get another hurricane alert, something…
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Weekly Wrap-Up

Well I titled the morning post Fickle Friday and my opening statement was that we could go either way and we did – all in the same day.

After zooming up almost 100 points on a totally overblown reaction to a slowing economy the Dow went down 60 points by 3pm but made a spectacular recovery right at the end. The S&P followed suit but finished below my 1,280 mark and the Nasdaq went back to just being sad and lost 7 points on the day after opening above 2,100 for the first time since 7/12. In comments at noon we noted that the Valero Rule had kicked in and that the oil sector was going to drag the markets down:

The last thing I wrote was “I expect big Nasdaq resistance at 2,118 if we get there.” I just didn’t think we’d get there in the first 15 minutes of trading!

Oil went all the way down to $74 but had a miraculous recovery (which I called to the second in comments at 1:45!):

It was a relief, at least that USO couldn’t break back over $70 and crude held under $75 despite frantic pumping efforts. The current contracts are breaking down as Chris turns into a tropical depression (not even a storm) as it enters the gulf but there is still plenty of fear in the front month contracts which roll over in 2 weeks.

The dollar continued it’s death spiral as rumors of a “Gentle Ben” spur the World markets to dump greenbacks. Gold rose back to $647 but was again rebuked at $650, turning gold stocks back negative from 2% gains earlier in the day. We should have played for that as I called it in the morning but I was too excited about the pre-market action to focus on that one.

I don’t see how the Fed can risk a pause with other Central Banks barreling ahead with a tightening policy and our government still spending $2Bn a day more than it makes. A responsible Fed will continue to tighten even if it hurts because we just don’t have the money! On the other hand, as I have said before, I would lower rates and boost inflation to 10%, raise taxes and pay off our $8,451,540,095,908.59 national debt with the wheelbarrels full of cash…
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Fickle Friday

We could go either way today but I will be very surprised if war worries can leave us with a positive note going into a weekend. It’s supposed to be all about jobs today as the report is out at 8:30 but now it’s all about Steve Jobs and what he knew when. Mr. Jobs has already given back a very large amount of suspicious grants, effectively cancelling the transaction before the SEC made him, but now Apple says they found a few more problems and will restate earnings back to 2002 (but the problems go back to 1997 in fact). I say who cares, just tell me how many IPods, IMacs and IPhones (oops, shhh, that one’s a secret) you’re going to sell next year. Just check out BRKS who already went through this and lost close to half their value since January but announced great earnings yesterday: Let’s see how hard Apple gets hit today as a mild slap on this high profile issue could ignite a major SOX and Nasdaq rally next week. Apple is up 40% since July 14th and just around earnings on 7/19 Apple said the option issue would not be substantial. That seemed pretty clear at the time so I’m wondering what is up with this sudden panic. Unless something really new has happened a drop would seem very overdone. I mentioned in the comments that I will not miss another chance to get Apple at $60 but apparently traders in Europe and Japan agree with me and quickly snapped up shares as they crossed below $65. Speaking of Japan, Asian stocks were mixed but Europe is having a nice morning but waiting for the go ahead from our jobs data (employment, not Steve). Oil continues to be out of control and anyone I can’t really believe the Fed is going to pause so Exxon can help consumers finance $80 per barrel. There is officially no hurricane and if last weeks pick, TEVA isn’t worried about the war, why should you be? Gold is in peak consumer demand season with weddings in India that will blend into the holiday buying season (if NILE is up 40% then what are they mounting the diamonds into?) so it’s now or never for a run at $700. We lost $650 yesterday and BVN got crushed after flirting with $31, a possible prelude to a…
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Thrilling Thursday

Wow, that was surprising!

I had no idea homebuilders were that ready to rally – I had a whole bunch I was going to look at next week but this caught me really flat footed as I was certain we had another day or so down.

Telco had a bad day as did Health Care thanks to MDT and oil ended up weak despit putting on a brave face most of the day. I got my commodity sell off but the SOX caught me by surprise with a 1.5% run and big tech came back in favor led by Apple, Google, Yahoo and Ebay, all of which I picked but gave up on for the week.

Am I getting impatient or just too pessimistic? I need to think about this very carefully…

I’m going to check in with Monday Me – he seemed like a rational fellow. MM says war is dragging on the markets and keeping oil prices high. More importantly MM says the Fed has already overtightened and the markets seem to think that they already know this but I also said their hands are tied and they have to keep raising because all the world banks a raising too.
All the world banks raised this week, the next move goes to Uncle Ben.

Most important, Monday Me said he would spend cash if the Dow breaks 11,200 (check), the S&P breaks 1,280 (check), the NYSE breaks 8,300 (oops) and the Nasdaq hits 2,100 (nope) led by the SOX at 415 (exactly) but 420 would be better.

So I guess that’s our answer, Monday Me says we need to look for 420 on the SOX, 2100 on the Nasdaq and anything but down on the S&P and we can buy with abandon tomorrow – sounds like a plan! Today’s me is still a little skeptical though…

Oil came back from a big drop in the morning as the Iranian Oil Minister threatened $200 oil if the US doesn’t back off on sanctions. Oil traders were thrilled with any excuse to goose the prices and oil made a comeback to hold $75.50.

Gold was down a touch on a slight improvement in the dollar. We could be looking at a 3-4% jump in the dollar (and a 3-4% drop in oil and gold) if the Fed hits us up with another hike next week. If…
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Forgotten Trades

It’s a dull day so I’m going back over few months to see how my rare leap positions are going as we tend to forget about them in the day to day action. Sometimes it’s nice to just buy something and walk away for a while…

AAPL Jan $55s seemed expensive at $9.40 on 6/20 but we held throught the dip by selling the $60s and collecting $2.50 while they have now recovered to $17.30 (up 140% from adjusted base).

BBY Dec $50s looked iffy in our first week but are getting a little respect $3 (up .20).

CEPH pulled back a bit but the Jan $65s are still $8 (up 85% since a great bottom call on 6/15).

CVX Sept $60 puts were a no trade on the Valero rule but now I like the Sept $65 puts for $1.85.

ELNK continues to get battered and the Jan ’09 $10s dropped 20% to $1.10 since 7/5.

It wasn’t very long-term but on 7/14 I wrote the following:
EXPD is a great business but has gotten a bit ahead of itself with a 48 p/e. The company just set guidance for long-term growth of 15% which is not what you pay this kind of price for… Aug $50 puts are $2.70 and I would like them at $2 or less.
Well, it went up, hit our target and then this:

We called for a cash out on GE Jan ’08 $35s way back in May but I noticed they are way down to $2.25 (down 35% from 5/1) and looking very attractive.

LVS Jan $60 puts for $6.80 (up 40% from 7/24). I need to remember to treat LVS more like GM and always short it when it gets uppity.

Way back on 6/28 I said: “I like the MGM Jan $37.50s for $5, selling the Aug $40s for $1.60 as I expect MGM to go lower but I would hate to miss the recovery.” It was better yesterday by $2.80 but of course buy out the $40 for .10 and I will double down on the $37.50s at $2.50 (down 20% after adjusting base) while waiting to sell again.

MRK Oct $40s zoomed up to $2.40 since just 7/24 (up 300%) and need to be taken off the table in favor of PFE when they are done pulling back.

MSFT has had a tough go…
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Thursday Morning

Hurricane Chris is now tropical storm Chris but there’s still a lot of wishing (by silly oil longs) that it may regain strength which could leave some irrationally high oil stocks on the table in early trading.

Asia was amazingly flat today as oil pulled back only slightly in overnight trading while Europe is down as the BOE raised rates to 4.75%, The ECB to 3% and Australia’s CB went all the way to 6% (Aussie stocks rose 1.2% on that news). It’s hard to imagine that the world bankers aren’t on the same page so I expect Fed hiking expectations to rise back over 50% and tomorrow may be a panic as jobs data will indicate very low unemployment putting pressure on wages.

Once again I am loving my cash call – I know my “day trading” isn’t usually for one day but we have to catch the waves that are thrown at us as we just don’t have the gravity to create our own.

Gravity should take its toll on $75 oil today as it still seems to be the magic number that begins to trigger the dreaded “demand destruction” that is feared by all oil producers support companies alike. As you know from my dogged determination to keep shorting XOM against the market this week, I really feel the sector has gone too far at this point.

Gold will pull back a bit unless there is a real change in war status, let’s see if $650 holds up as I am pretty sure $660 is a goner today. The big wild card is North Korea again, who are building missile silos that are aimed right at Japan. It is generally not taught in our schools how much Korea and Japan hate each other but let’s just leave it that there is a dispute as to whether Japanese soldiers raped and killed the last Queen of Korea or if they just tortured her and set her on fire:


I’m not quite sure how to take new home sales numbers – The annual rate is “down” to 1,131,000, off 11% from last year’s record pace. It’s a huge decline and USUALLY housing declines are great indicators of upcoming recessions (represented by grey bars on graph) but it usually retraces 30% or more.

We had rising rate concerns in the go-go ’90s and…
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Which way Wednesday???

Hard to tell what today really told us.

We had a nice broad based rally but low volume and could not hold our numbers:

The Dow fell short of 11,200 after spending 2 hours above it
The Nasdaq didn’t want anything to do with 2,100, treating 2,090 like the plague
The S&P couldn’t stay over 1,280 in the end
The NYSE could not break 8,300

So every number I called for on Monday was tested and failed in today’s rally. The big turn came at 2pm when we got very clear get out signals from Apple, TXN and GE. When 3 out of 4 indicators we are watching say sell – sell!

I want a rally as much as the next guy but I spent all weekend coming up with those numbers and it is very scary to see them all hold 3 days later… So it’s back to cash and day trading for now until we see which side of the fence the markets are going to fall on.

With any luck we will punch through those levels on convicted volume tomorrow but it is far more likely something will cause a huge commodity sell-off that will pull the markets back down instead.

Oil is up close to $76 but the dollar index is at 85, down 4% from where it was when oil was at $79 three weeks ago. So, on a dollar adjusted basis, oil is down about 10% from where it was on 7/14 which explains XOM and OIH’s divergence in this “hot” oil market:

The conditions are right for oil to punch through but a halt in rate hikes by the ECB may boost the dollar and bring oil quickly back below $75 in the morning which may knee-jerk the oil patch back a couple of points. We have Israel, Iraq and a hurricane in focus tomorrow against a backdrop of intense demand so anything under $80 per barrel is a problem for oil bulls because it just doesn’t get any better than this on the bad news front!

Gold is supporting oil prices but more so indicating how weak the dollar is yet everyone keeps buying our bonds because it’s still safer looking than Euros or Yen. Dollar supremacy is still ours to lose and I really hope Paulson has something up his sleeve besides the same o’ same o’.…
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Terrible Tuesday Wrap Up

How are you all liking my cash out call on Friday morning now?

Ugh, Biff, Pow, Ouch! We need Batman cartoon violence balloons to illustrate what the market is doing to investors this week.

As I feared we never formed a really good bottom and we are paying for it now with sickening pockets of weakness developing everywhere.

Now we are breaking below my Monday levels so go reread Monday morning’s blog and let’s rethink this bull thing! The Dow did not hold 11,200 but did take a nice firm bounce off 11,100 right at the end of day. You could say the Nasdaq bounced off of 2,050 but that would only be because it is so pathetic that you are just trying to say something nice while the S&P slipped back into the danger zone at 1,270. The NYSE fell back to 8,200 but had no qualms about hitting 8,150 by 10am this morning so I have little confidence in this level.

Exactly as we were worried about this morning, gold broke $650 and confirmed that there really was something to worry about in the world and oil was able to hold just under $75 while decent economic news and signs of inflation put the Fed back in the race. Oddly, natural gas had a huge pullback (not so oddly as I mentioned a few weeks ago they have until Sept 30th before they have to shut down gas production due to oversupply) and we will have to wait until inventory tomorrow to see what the real deal is on oil.

Another factor that hurt the markets today was some extensive interviews with Paulson who seemed to indicate he was going to say the same “Strong dollar, blah blah, China currency, blah blah, social security” that every Treasury Secretary since Hamilton has been BSing about. I believe it was Wimpy J Wellington who first said “I will gladly pay you Tuesday for a hamburger today.”

Paulson needs to borrow $2Bn a day to feed his boss’ debt binge spending habit and the world is wising up to our game and is asking us to show them the money and the Secretary will have no choice but to fire up the presses to pay down some of that debt.

Somehow people were surprised that auto sales were off from a year ago when the majors were practically paying you…
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Telling Tuesday Morning

Once again we have a Tuesday which will set critical market direction.

There are some very confusing market signals so it will be very interesting to see which way things lead us. Asia is down a bit, Europe is up a bit and our futures look down but not with any real conviction.

There was no conviction in yesterday’s market either with a very low volume day in which we mainly held flat. Now that we have a new month perhaps we can get an idea of what the funds are thinking but August is not usually a very good month for the markets (last August was a 300 point Dow drop to 10,400).

It’s all about the Nasdaq again which is painfully oversold but will probably get huge resistance at 2,125 and the Nasdaq still aren’t going anywhere without their SOX which haven’t been this coiled since late August 2004 when they exploded for a 30% gain in 3 months. The SOX picked up 10% last week and it may be late August before they are ready for another move up but, Summer fears aside, I think they are ready to rumble.

My new safety number on the S&P is 1,277, a big jump up but I am now calculating where we need to be to reverse the “death cross” that formed on 7/18. I really like what I see on the charts but what I don’t see is the catalyst that will get the party started (I suppose the Fed could pause next week but it is now 65% expected). Getting to 1,281 will be a big deal as it will take out the July high and reverse a trend:

After a made for TV movie, 4 pseudo science reports on major channels and 16 CNBC special editions on the Bird Flu Pandemic - the real scientists at the CDC just completed a study and said it’s really not that contageous. Tell that to TSN, who’s stock is in critical condition along with PPC who are a better bet for recovery (but wait until after 8/1 earnings!). Should chicken come back in style (and it certainly hasn’t from Tyson’s earnings report) I think the whole restaurant sector may recover as one of the things that’s been hurting profits is less orders for their highest mark-up item.

Maybe it will also turn out that oil isn’t…
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Phil's Favorites

Congress is considering privacy legislation - be afraid


Congress is considering privacy legislation – be afraid

Courtesy of Jeff Sovern, St. John's University

Supreme Court Justice Louis Brandeis called privacy the “right to be let alone.” Perhaps Congress should give states trying to protect consumer data the same right.

For years, a gridlocked Congress ignored privacy, apart from occasionally scolding companies such as Equifax and Marriott after their major data breaches. In its absence, ...

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Zero Hedge

Key Events This Week: Trade War, EU Elections, Durables, PMIs And Fed Minutes

Courtesy of ZeroHedge

Looking at this week's key events, Deutsche Bank's Craig Nicol writes that while the unpredictable nature of US-China trade developments will likely continue to be the main focus for markets again next week, we also have the European Parliament elections circus to look forward to as well as various survey reports including the flash May PMIs which may offer some insight into the impact of trade escalation on economic data. The FOMC and ECB meeting minutes are also due, along with a heavy calendar of Fed officials speaking.

The European Parliament elections will kick off next Thursday with voting continuing into the weekend across the continent, with results expected on Sunday. With the elections surrounded by internal and external challenges for the EU, members di...

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Kimble Charting Solutions

Will S&P 500 Double Top Derail The Rally?

Courtesy of Chris Kimble.

The rally off the December stock market lows has been strong, to say the least. The S&P 500 rallied 25 percent before hitting and testing the 2018 high.

The old highs proved to be formidable resistance and ushered in some volatility in May… and a 5 percent pullback.

In today’s 2-pack, we look at that resistance level – could that be a double top? We can see similar patterns develop on the S&P 500 Index and its Equal Weight counterpart.

Both indexes are testing short-term Fibonacci retracement levels of the recent decline at point (2).

What takes place here after potential double top highs will be important. Stay tuned...

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Insider Scoop

60 Biggest Movers From Friday

Courtesy of Benzinga.

  • Fastly, Inc. (NYSE: FSLY) shares jumped 50 percent to close at $23.99 on Friday. Fastly priced its 11.25 million share IPO at $16 per share.
  • Outlook Therapeutics, Inc. (NASDAQ: OTLK) shares climbed 37.3 percent to close at $2.10 on Friday after the stock rose over 68 percent Thursday following an Oppenheimer initiation at Outperform with a price target of $12.
  • Cray Inc. (NASDAQ: CRAY) shares rose 22.5 percent to close at $36.52 after Hewlett Packard Enterpri... more from Insider

Chart School

Weekly Market Recap May 18, 2019

Courtesy of Blain.

China – U.S. trade talk continued to dominate the week.   A heavy selloff Monday was followed by 3 up days, with Friday moderately down.

On Monday, Chinese officials announced retaliatory tariffs against the U.S., hitting $60 billion in annual exports to China with new or expanded duties that could reach 25%.

Then on Wednesday:

The Trump administration plans to delay a decision on instituting new tariffs on car and auto part imports for up to six months, according to media reports.


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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control


Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...

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DNA as you've never seen it before, thanks to a new nanotechnology imaging method

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


DNA as you've never seen it before, thanks to a new nanotechnology imaging method

A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

Courtesy of David M. Gilbert, Florida State University


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More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...

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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism


The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...

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Swing trading portfolio - week of September 11th, 2017

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


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Free eBook - "My Top Strategies for 2017"



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

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

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

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

Some other great content in this free eBook includes:


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


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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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