Archive for 2007

Weekly Wrap-up: Midas Phil

OptionSage submits:

Well I thought that my greatest challenge for the week would be navigating the stock markets successfully but that all changed early Sunday morning as Phil sent me his spreadsheets documenting how his trades performed while he was on vacation!  If you have ever tried to puzzle through a 3-dimensional maze blindfolded and with only a sniffer dog to help guide you through impenetrable darkness then you will know how I felt when I first looked at the positions he has open!

I can only say that I have new found respect for his ability to stay on top of these positions and still make money!  And indeed Phil did make money!  We’ll come to that in just a moment.  But before I attempt to highlight the details I should point out that where information is not to the standard that Phil presents, the failure lies solely with me – and thankfully Phil will be back next weekend to detail his positions!

I suppose it’s no surprise that Phil made money last week.  No matter whether he has 5 screens in front of him monitoring every movement in the market or when he is enjoying the European sunshine, the money rolls in.  I think I am going to start calling him Midas because he sure has the Midas touch.  Based on what I see in the short-term virtual portfolio, if Phil continued making as much money every week as he did this week he would be on course for $1,000,000+ per year in the short-term virtual portfolio alone! [What’s really striking is I believe he is on course for much more than that!]

Before delving into the positions – or attempting to do so – I’d like to take a moment out to discuss some of the movements that happened this past week.  Many of you may have noticed some fundamentally strong stocks got punished over the past few days while some fundamentally weak stocks rose significantly (just look at some of the homebuilders!).  Why did this happen?  A strong possibility is that, in an effort to raise cash, funds were forced to sell fundamentally strong stocks and cover short positions on fundamentally weak stocks.
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Don’t Just Do Something, Stand There!

"I will not fear
Fear is the mindkiller,
Fear is the little death
That brings total Oblivion
I will permit my fear to pass
Over me and through me
And where it has gone
I will turn the inner eye
Nothing will be there
Only I will remain."

I posted this quote on Wednesday, August 1st, when the market was reeling from shocks and I mentioned that we needed to get to cash, get analytical about the market and avoid complacency in either direction.

It is with tongue firmly in cheek that I title this article the opposite of Sage's last post as I mentioned in last week's wrap-up that I followed his guidelines on Vacation-Proofing my portfolio prior to my trip (going quite well, thank you!).  What I have seen this week though, is a lot of fearful behavior; by retail traders, by pro traders, by the Fed, by World Banks… pretty much by everybody!

One thing I learned as a CEO, as a consultant, as a trader and as a parent is that, while there is certainly a time for action, there is also a time for inaction – a time in the early stages of a crisis to asses a situation calmly and rationally in order to determine a PROPER course of action.  There is an expression that goes: "fools rush in where angels fear to tread" which I have always used to illustrate the value of good due diligence to my M&A clients but it is also very appropriate for this kind of market.

Once I lost $45,000 while flying from NY to Houston on a market dip but worse than the fact that I had arrogantly not hedged my positions was the foolish way I overreacted and tried to "win it back" once I got to Houston, far away from my regular trading desk and most of my notes.  I quickly doubled my losses and had a very gut wrenching plane flight home, with my portfolio in turmoil – left to the whims of the market.

I often tell members that I don't mind losing money as long as I learn something but that's total BS when it costs you $90,000 to find out your positions aren't as strong as you thought they were.   The lesson I
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Don’t Just Stand There, Do Something!

OptionSage submits:

“Some days are better than others” Bono, U2

Scanning articles in the media over previous weekends, these were a sampling of the headlines:

“Fears Intensify on Economy” – Wall Street Journal

“Bear Market Warning Flags” – Forbes

Earnings Loom After Painful Week” – CNN Money

“Dow’s worst week in almost 5 years” – Fox News

“Forecast of Stronger Growth is Under Threat by Market Turmoil – Bloomberg

“Stocks End Sharply Lower as S&P Sees Worst Week Since 2002” - CNBC

“Coming Week:  Fear in Charge” –

The doom-mongering was widespread.  The VIX closed in on 30 this week.  Cramer appeared to be predicting recession:  "We will have a recession"  and Happy….well Happy is batting 100% on closed trades since going private!!  Excellent work Happy! 

It’s quite incredible how the media coverage can change on a dime from boom to bust.  Just a few weeks earlier we had headlines such as: 

“Goldilocks Economy”, “Double-Digit Earnings Growth”, “Global Bull Market”, “Liquidity Galore”, “Dow 14 points from Record Close”. 

Personally I was disappointed to see the European Central Bank inject liquidity this week.  During the past two days, the European Central Bank (ECB) injected €155.85 billion ($214.56B) into the system, the U.S. Federal Reserve injected $59 billion, and other central banks around the world added billions, too. It did cause an almost immediate strengthening of the dollar when the Europeans acted.  But they had led us all to believe that they would increase rates again next month so this seems like a U-turn.  As one CNBC commentator put it "You can’t tell everybody that black is black and then tell them that black is white and still have them trust you!" . 

The calls for Fed rate cuts in the US seem to be more pervasive and if the Europeans were to raise rates I think it’s time to pack up and move to Europe because the US dollar will really start to take a tumble.  Some European analysts I spoke with predict the dollar will slide to 1.50 against the euro over the next few months.  Say it ain’t so Hank Paulson!

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Again, “What a difference a day makes!!” With more bad news from the financial and housing sectors, the market went down “huge” today, reversing yesterday’s “big” gains, and more! The Dow was down 387 points; SPX was down 44; and, Nasdaq was lower by 56 points!
As you can see, most sectors were down. VIX jumped again, and went almost to 27 at one point!!

This is what happens when a nervous market gets bad news! Interestingly though, Nasdaq went green mid morning, perhaps still helped by CSCO’s good earnings from yesterday. SOX held up well, closing above 500.

The major indices are once again back in their support ranges. Yesterday, I said, “I’m looking at some near-term “resistance” levels. Since SPX did go above 1500, I’m seeing 1500-1520. This is the range that I’ll be looking for SPX to go above to feel more comfortably that the market has completed a healthy correction.” I also thought that the market could go a little higher before re-testing the bottom. But, with the BNP freezing funds news coming out of Europe overnight, the U.S. market didn’t have a chance. In any case, it looks like we are re-testing the support ranges again!

SPX closed at 1453.09, back within its support range of 1440-1460. We’ll have to see if this support range can hold and allow the market to create a double-bottom.

As expected, Asia is mostly down right now.  Hong Kong is down over 600 points; Japan is down over 400; and, China is down over 100 points!  Central banks in Asia are injecting extra cash into banking systems in a bid to calm the money markets.  It will be interesting to see in the morning if the Asian markets can hold their support levels and create a double-bottom.

Until we know where the market is going to go, the safest thing to do is perhaps still to hold cash. A few shining stars did shine through on this gloomy day. An article highlighted some “clean tech” stocks yesterday, and three stocks jumped out to defy gravity today. ZOLT flew almost +11% today to clinch a new 52-week high of 51.77! AMSC jumped more than +5% and also make a new 52-week high at 27.59. SPWR added another +1.84% on top of yesterday’s +13% gain, with a new “all-time” with at…
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Thumping Thursday & Ominous Omens

OptionSage submits:

“Today was the best day I’ve had since joining Phil’s Stock World. I want to thank Phil, Happy, Z, Sage, Dragon, Optrader and everyone here for being so helpful to me. You guys are GREAT!   Can’t wait for tomorrow.”  Greg

When the markets drop and we make a lot of money we know that others are not so fortunate and Phil tends to be somewhat embarrassed at proclaiming how well we’re doing in bearish markets since we often tend to be in the minority.  However, I am going to indulge in congratulating the group on another job well done with the Dow down 387 points, the NASDAQ down 56 points and the S&P 500 down 44 points.

We can’t say we didn’t forewarn that this might occur.  Just two days ago I commented:

“Temptation is indeed on its way and the market sure does feel like a lion’s den!”


2 – DO NOT TRY TO CATCH A FALLING KNIFE (meaning it’s dangerous to try to buy a stock that is falling because likelihood is it’s falling for a reason!

And Phil echoed the sentiments with:

“Don’t let a day’s move in the market’s guide your "investments."”

The NASDAQ corrected from a high of 2725 to a low of 2525, then retraced 50% to 2625 before today’s correction to 2,556 – the low of the day!  The DOW dropped from 14,000 to 13,200, then retraced 50% to 13,600 before being strong rejected also today, down almost 400 points!


Fundamental analysts are obviously concerned about sub-prime woes.  Technical analysts have just seen a sharp correction off the 50% retracement level and no doubt the sentiment shifted even more bearish after today’s move.  Again it doesn’t mean that we won’t rise up in the next day or so but that one day move doesn’t mean you should buy into the thesis that we are starting a new uptrend!  The market will pop up during
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Thursday Morning Post

This is for the Thursday comments!  Be very careful out there.  This is why we’re keeping cash.  Good thinking by those who added to their mattress plays yesterday!

Thrill a Minute Thursday

"…it doesn’t necessarily mean that being bearish is suddenly more profitable!" – Phil Davis

The stock market was in a very cheerful mood today! CSCO’s earnings seems to have inspired buyers to come back in. CSCO shares went up +6.7%, comparing to yesterday’s AH gain of +5.73%. I also mentioned PCLN yesterday with an AH rise of +10%, and it closed up more than +22%!! Things were simply on fire today! Right from the open, the investors/traders must have felt like they are chasing a runaway train! Nasdaq gained more than +60 points at one time, closing up +51.38! SPX closed just under 1500.  The Dow made it almost to 13700!

I’m going to continue the theme that I started yesterday, comparing VIX to SPX. Yesterday, I pointed out that the support levels of SPX seem to be pretty strong and VIX has gotten too high. Together, these indicators signaled a market bounce for me! And, look what happened today! I can’t take all the credit though. There were simply too many shorts in the market. With a bellweather company like CSCO delivering positive news, the bulls used it as an excuse to give the shorts a hard squeeze! Of course, from my perspective, the “technicals” supported that move!

SPX pierced through 1500 at one point, but, closed just under it. Its MACD continues to rise. We’ve been talking about the support levels, which I had set them at 1440-1460. Now, I’m looking at some near-term “resistance” levels. Since SPX did go above 1500, I’m seeing 1500-1520. This is the range that I’ll be looking for SPX to go above to feel more comfortable that the market has completed a healthy correction, and can resume back up.

VIX continued its slide today, although not by a whole lot. Its MACD is now curving down. “19" was its resistance for over 3 years. Now, it may become a support. So, VIX could come all the way down to test 19. Going along with yesterday’s theme of “VIX peaking and coming down, up goes the market”, we may see the market go up more, before the market feels the need to make a double bottom. So, keep in mind of those support and resistance ranges.

President Bush had something to
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Big Chart Update

How are we doing?

When I have to view the market from 4,000 miles away I find the good old Big Chart to be a particularly useful way to check the vitals:






































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After The Fed Wednesday

So, the Fed holds rates unchanged and the market rallies, as explained by this article from Reuters. According to this article, “The Fed, which also left interest rates unchanged at a policy meeting, buoyed the market by reassuring investors that problems in mortgage lending and corporate finance would not drag on the broader economy.” Hmmm…is it all really all that simple? So, why did the market dip to day low, before finding the “right” direction to go?
In fact, “this” happens a lot when there are no surprises from the Fed. (By “this”, I mean that the market first goes the “wrong” direction, and then, turns around quickly and go the right direction.) Most people expected the Fed to hold the rates steady. So, why didn’t they react right away and let the market go up more? Why did it have to come down first? Manipulation? No, you don’t say! Could it be that if the market had continued to go up right when the Fed announced its decision, it might have jumped too much and get ahead of itself? Are the big traders “somehow” guided by technicals?…and, is there some level of “control” beyond the fundamentals? No, you don’t say!

Let’s expand a little more on “the technicals”!
SPX had tested 1440 and it held up. Yesterday, it closed above 1460. These are the support range levels that we’ve been looking at since 7/26. Now, the chart shows that the MACD is turning up. These are signs that show the strength of the support.

I’ve also been pointing out that the VIX is very high!
VIX today closed below its 10-day MA. The MACD is just starting to come down. In the past 10 years, VIX had always gone up when the market is down. But, when VIX peaks and starts to slide, the market goes up. When VIX stays steady, the market continues on an uptrend rise.
So, why am I pointing this out? Like I’ve been saying for a few days now, I think that VIX had gotten too high, ahead of its technicals, and it needs to come down. This translates to “It’s time for the market to bounce”!

Also, check this out:
SPX (monthly, 5 years)
Even after 3 weeks…
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Volatility = C-O-N-F-U-S-I-O-N

Well, well, well, what an interesting day in the market!  Billed as one of the most anticipated Federal Reserve policy statements in decades, the market digested the news with the following intra-day moves:   It was initially down, then it was, up, then it was down, then it was up, then it went up some more, then it went down a lot, then it went up a lot, then it went down, then….heck now I am confused…where did it end up?  Flat?!?! 

At 1.37 I mentioned “I sure hope we get some reaction either way, I’ll be very disappointed if we don’t get volatility after the statement comes through.”  Well we got the volatility alright, but it sure would have been nice to see the move in one direction!  As it is we end the day up just slightly, 35 points on the Dow, 14 on the NASDAQ and 9 on the S&P 500.

Today, I think we all learned that volatility can be spelled C-O-N-F-U-S-I-O-N!  The market didn’t know how to react to the policy statement which read:

“The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

“Economic growth was moderate during the first half of the year. Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy.

“Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.

“Although the downside risks to growth have increased somewhat, the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the outlook for both inflation and economic growth, as implied by incoming information.”

Well it seemed everyone was confused.  Our pal Jimbo – oh you know we love you Jimbo! – did a complete 180 on CNBC where he stated that he did NOT want a rate cut because…
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Zero Hedge

Americans' Economic Hope Has Collapsed

Courtesy of ZeroHedge. View original post here.

Which came first, the confidence or the stock market rally?

One thing is for sure, the crash in stocks in December has crushed the hope of Americans that their economic future is going to be better under President Trump.

Overall confidence dipped to 58.1 - a 4-month low, but, U.S. consumers this month were the most downbeat on the economy since November 2016, a third straight drop after expectations reached a 16-year high just three months earlier, as the partial government shutdown wears on toward a fourth week.


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Kimble Charting Solutions

Triple Breakout Test In Play For S&P 500!

Courtesy of Chris Kimble.

Is the rally of late about to run out of steam or is a major breakout about to take place in the S&P 500? What happens at current prices should go a long way in determining this question.

This chart looks at the equal weight S&P 500 ETF (RSP) on a daily basis over the past 15-months.

The rally from the lows on Christmas Eve has RSP testing the top of a newly formed falling channel while testing the underneath side of the 2018 trading range and its falling 50-day moving average at (1).

At this time RPS is facing a triple resistance test. Wil...

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Phil's Favorites

Brexit deal flops, Theresa May survives -- so what happens now?


Brexit deal flops, Theresa May survives -- so what happens now?

Courtesy of Victoria Honeyman, University of Leeds

As the clock ticks down to March 29 2019, all of the political manoeuvring, negotiating, arguing and fighting is coming to a peak. In the two and a half years since the 2016 EU referendum, views on both sides have hardened and agreement still seems as far away as it was the day after the referendum.

With Theresa May’s withdrawal agreement disliked by all sides, and voted down by an unprecedented majority in the House of Commons, everyone is wondering what can and should be done next?


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Digital Currencies

Crypto-Bubble: Will Bitcoin Bottom In February Or Has It Already?

Courtesy of Michelle Jones via

The new year has been relatively good for the price of bitcoin after a spectacular collapse of the cryptocurrency bubble in 2018. It’s up notably since the middle of December and traded around the psychological level of $4,000... so is this a sign that the crypto market is about to recover?

Of course, it depends on who you ask, but one analyst discovered a pattern which might point to a bottom next month.

A year after the cryptocurrency bubble popped


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D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...

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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ... more from Insider

Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...

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Members' Corner

Why Trump Can't Learn


Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...

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Opening Pandora's Box: Gene editing and its consequences

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


Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.


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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...

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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...

Learn more About Phil >>

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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.

Market Shadows >>