Archive for 2007

Testy Tuesday Top Off

I don't know what to make of today…

The Dow had a good start but pulled back and couldn't hold 13,100 BUT the Nasdaq had a pretty good day BUT couldn't hold 2,525 and the S&P made a nice break back over 1,450 BUT couldn't hold that.

In comments this morning I reminded members: "Market future – I said last week (or the week before) that it’s very hard to be short when the Fed is stepping in to stop a 10% correction from happening. Now we have US Senators (head of the Budget committee no less!) freaking out just because a respected Fed Governor says maybe we should wait until the Sept 18th Fed meeting to make a decision.

"That’s why I’m saying cash, not shorting. We need to let the market find a bottom but if the Hang Seng can be thrown up (and I use that term because that’s how the shorts must have felt) 15% in 3 days then I wouldn’t be surprised by any move the market might make but I seriously have no idea if we will go up down or stay flat right now and I personally would rather wait a week (especially this no-data week) to see how things shake out than play for the sake of playing."

Oil dropping $2 mid-day forced me to cover our DIA Sept $130 puts with additional DIA Sept $132 calls at $2.95 (we already have the Oct $131 and $133 calls so now it's a strangle) as I have often said that oil drifting back to the mid-$60s is the one thing that can reignite the markets.  Every dollar per barrel we save is like $180M a day thrown back into consumers' pockets (as we pay for our global 90Mb/day habit in several mark-ups).  That's $4Bn a month of discretionary consumer spending that is released every time oil gives back $1 of the $30 per barrel they have stolen from us for the past 2 years – almost $1Trillion of excess profits that have been sucked out of the global economy and placed into the pockets of the energy sector – not to mention into the hands of governments who hate us!

We haven't added any puts (other than CFC) and we've stopped out of virtually all our existing puts but there…
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OptionSage submits:

In a recent article, "Was Last Thursday The Bottom?" ,   I wrote "It appears to me that we could rise up another couple of hundred points on the Dow before encountering a down-trending resistance line that began with the 14,000 peak and continued with the 13,600 rejection.  Until that resistance is broken convincingly I remain unconvinced that we won’t test the lows again.  On the other hand, a convincing break above the 13,400 level would be a very positive sign."   The Dow has remained relatively flat in the past two days but the NASDAQ has risen higher to 2521.  Recall 2525 was the low we hit following the initial correction from 2725.  The possibility of encountering resistance at this level is high since it aligns with a downtrending resistance line (see chart below).  Some of our favorite stocks, Google (GOOG) and Apple (AAPL), rose handsomely today, reaching $506.61 and $127.57 respectively.  With rising stocks,  Paulson declaring the economy is strong and volatility subsiding in recent days, are we back to the serene old days of marching to Dow 15,000?   Let's take a look at the charts to find some answers….


The NASDAQ is approaching a downtrending resistance line and encountering an old support line at 2525 (which has the potential to act as new resistance). No bullish confirmations here…


Apple is at a critical juncture and the next couple of days should determine whether the stock will break back up or decline to new lows.  No guarantees here either….


Google is also encountering a downtrending resistance line and doesn't have much room to the upside before needing to make a decision on which direction it will commit to.


Meanwhile our stock of the week has to be Research In Motion, which is up a whopping 20 points in just a few days.  Did we profit from the rise?  You betcha!  Happy Trading was up over 100%+ 

Bottom Line:  We are at critical resistance levels that MUST be broken if we are to resume our march higher.  Thursday & Friday should be critical in determining the future direction of the market. Until we see those resistance levels broken, patience is needed, cash and hedging are smart!  As Phil pointed out Treasury Bill Yields have fallen most since 1987. 


Trade Safely,


Tuesday Virtual Portfolio Moves

Posted August 21, 2007 at 9:49 am | Permalink (Edit)
CROX is up and up no matter what but let’s look to take 1/2 off in the $10KP if we can get $4 and then put a .25 Tstop on the rest as it’s too much exposure and we are so lucky to make this much in a bad market. If the Nas goes red I will kill the whole trade regardless.

GSK Nov $52.50s seem safe in the $10KP but I will feel better selling 1/2 the position (5) of the Sept $50s at $2.25. XXX

Posted August 21, 2007 at 10:23 am | Permalink (Edit)

For those of you who do want to play something, I can’t possibly endorse following Happy’s trades more! He has been amazing in picking out the very few strong winners in this impossible mess of a market and, now that he’s going private, he’s been putting in agonizing amounts of time combing the market for winners. That being said, I will caution all of you, Happy included, to take profits and run when they come.

TGT – as I expected, good numbers but no reward for the poor Sept caller. Our .80 spread is not changing so far but we can take a 25% profit an run in the near future or wait it out as our caller twists in the wind. I am hopeful that we get a recovery between now and October but you have to be willing to gut it out and possibly put whatever meager gains we end up with on the Sept calls into rolling down the Octobers to $60s as we get closer to expiration. I’m just standing pat for now.

Posted August 21, 2007 at 10:39 am | Permalink (Edit)
AAPL with a nice UBS note. It absolutely amazes me that it takes an analyst to tell people this company is a buy at $120…
Posted August 21, 2007 at 11:06 am | Permalink (Edit)

AAPL – selling $130s at $5. Buying GOOG $510s at $10.40 with a $9 stop to protect my Apple sale. XXX

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Testy Tuesday Morning

Sea Turtles Look to Escape Hurricane Dean.

That's on Page 1 of the on-line Wall Street Journal today!  Did Murdoch take over already?

I'm getting very sensitive to changes in the Journal as it is always open on my desktop and I use it as my reference of choice since I can't expect members to subscribe to everything but I do expect them to keep up with the Journal so I post links from there with the assumption that people have unrestricted access.

It will take a lot more than a few "page 3 girls" to get me to cancel my WSJ subscription but I've already started cross-checking things I usually take for granted, like last night's article which pitted Democratic Senator Kent Conrad against Fed Governor William Poole in a manner which made Conrad look like an idiot.

Well I checked it out and it turns out he IS an idiot and actually did say exactly what the Journal said he did but it reminds me how easily a trusted news source can be used to influence public opinion.

The image on the left is from Mr. Murdoch's UK Sun paper, which has a circulation of 3M per day – equal to the NY Times and 4x larger than the WSJ (and NO business section).  Rupert does Ann Coulter (who Zoe looks a little like) one better by having totally naked girls shoving propaganda down British throats. 

I can just imagine the venerable Bancroft family passing pictures of Zoe and Anna around the oak conference table while discussing the "merits" of selling out to a "seasoned" newsman.  Murdoch has already made is clear that he intends to expand coverage of "non-business" news to boost circulation.   “There’s a lot of other news and a lot of other things we can do." said Murdoch, who is philosophical about his pending reception at the Journal: "If people have been saying it's against their principles to work for me, we'll of course respect that."

Principles will indeed be put to the test throughout the Dow Jones corporation.  Founder Charles Dow was born on a farm in 1851 and never graduated high school but worked his way up in the news business to start the Journal in
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Monday Mop-Up

Whee, that was fun!

I started the morning off boasting about my power to control the markets and I posted a chart that showed the different psychological points we go through as the market moves.  I have to thank the Nasdaq for hammering home my point by almost exactly following that chart in today's actual movements:


That is the intraday chart of the Nasdaq (in gray) against the chart from this morning.  How many other analysts do you know who draw the day's chart BEFORE the market opens? 

THAT is the kind of service you can expect at PSW!  On the less egotistical side of the market, I gave up a little early and drew back on front-month calls as the market weakness and my lack of puts (as I sold out on last week's dip) left me uncomfortably unbalanced.  It is interesting to see how my comments to members follow (or don't follow, as the case many be) the panic/euphoria model above:

  • 10:05, point 2 (The trend is holding, I'll buy at the next consolidation):

    • Index puts – I only have 200 DIA Sept $230s left and they are offset by 250 Oct $131 and $133 calls so I would have to say I’m neutral there. I’d really like to see us break up here but if 13,100 is going to offer resistance on a day when the Hang Seng gains 6% and Europe gave us a good start then I’ll probably be dumping those calls and upping the put side.
    • There’s no big data this week so it’s all about investor sentiment but don’t forget I just said above that we expect weakness today as the energy stocks drag down the financials and the other indices. As long as APPL, GOOG and RUT hold it together I can hold onto some hope. With volatility the way it has been this month, any move under 100 points is just chart noise anyway!
  • 10:45, point 3 (Damn, I missed the consolidation… Let's buy):

    • Setting tight (15% of profits) stops on all gainers over 50% as I just don’t like the internals so far. My perspective is I’d like to have more cash and less positions, especially as the big money index plays are proving so profitable it is almost

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Monday Virtual Portfolio Moves

Posted August 20, 2007 at 9:25 am | Permalink (Edit)

Favorite leaps – I wll be going over these carefully today and the past few days are a real gift in examining the strengths and weakness of our positions but PLEASE EVERYONE REMEMBER THE VIX IS OBSCENELY HIGH AND YOUR OPTIONS ARE OBSCENELY OVERVALUED!!! So when I say get to cash I also mean before everyone realizes our virtual portfolios simply aren’t worth what they seem to be.

This makes it a very tough time to buy leaps as they are generally overpriced but it’s OK if we enter sensible spreads as our caller is paying too much as well. That has to be balanced against the danger of a short-term rally that puts our callers into the money so do not expect any quick answers today. I tell you people to be patient and study, study, study all the time – it would be really sad if I can’t manage to lead by example here!

Posted August 20, 2007 at 9:42 am | Permalink (Edit)

RIMM – my Jan ‘09 $300s are up 161% ($10 was credited to them from the exp of the Aug $220s) which is hysterical to me as I bought them solely to cap my margin on the short side on 7/6 with RIMM at $214. Now RIMM is at $223 and my $300s are “worth” $27.50 (up $8)? That’s exactly the sort of crazy valuations I’m talking about. Even if I sell the very dangerous $230s for $11.10 the volatility decrease of the stock finishing under $230 would negate most of the gain I make so my risk/reward profile on the spread is all screwed up… If I wasn’t so far ahead I would sell for sure but I still think RIMM is too much fun to short into excitement and I need plays like this to keep me from getting bored in the chop but nothing more.

Posted August 20, 2007 at 9:59 am | Permalink (Edit)

WFR – with 9,000+ stocks out there owning one you don’t enjoy is silly. I love the fundamentals on these guys and I believe my faith will ultimately be rewared (actually it has several times already). The…
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Monday Market Madness

Woo-hoo, here we go!

I'm back so of course the markets are flying up and oil is in retreat BECAUSE I HAVE THAT KIND OF POWER!  Seriously, I feel great – the vacation was a great idea and I really do urge people take a real break once in a while.  Not some little 3 or 4 day thing, but at least 10 days to do something totally different.  It gives you a very nice perspective on things!

The Hang Seng is up a stunning 1,208 this morning (6%) but that was not the index that was in trouble.  The Nikkei shot up 3% but finished at a still pathetic 15,732 – about 1,200 points lower than when I started my vacation 2 weeks ago.  Like I said – PERSPECTIVE!  India is up a couple of points making up 286 of the 844 points it lost in my absence but the BOJ injected $8.7Bn into the markets this morning, a move that would be proportionally like our Fed dumping $35Bn in a single day.  That follows over $9Bn that the BOJ placed on Friday and the Aussie Bank added $2.7Bn today and boosted that market $4.5%.

What's cool about $8.7Bn is that it translates into 1,000,000,000,000 Yen – how's that for a headline in the Japan business section?

It may be fine for Blanche DuBois to say "I have always relied on the kindness of strangers," even Karl Malden could get lucky with a Trillion yen in his pocket, but the US economy is a harsh and demanding mistress and our leaders can piss away a Trillion Yen at breakfast and still have the balls to ask what's for lunch so I'm going to continue to urge caution until we see a real turn. 

Option Sage just posted an excellent article on the subject so I won't rehash what constitutes a turn but it will take a lot to get me off my plan of cashing out much of my long side and waiting for the other shoe to drop.  Happy Trading has not 1 but 2 parts to his weekly forecast along with a very clever call on XME, which we will have to look at later for  a nice upside hedge should the BOJ's…
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Quick Virtual Portfolio Review

I have a lot to say about the morning but I wanted to post up the virtual portfolio on the member site as we closed 144 postions in the past 2 weeks as we were heavily hedged with August puts and calls sold against our longer positions so I will keep this as brief as possible.

It was a FANTASTIC week!

With expiration forcing things closed and my call to set tight stops on short postions on Thursday we got near perfect exits on 85 positions closed which AVERAGED 94% gains.  From a cash perspective the performance was even better as the only new plays I made while on vacation were loading up on the DIA puts early last week and those plays all went great.

The Short-Term Virtual Portfolio is up a ridiculous 516% as that’s where the DIA plays were made but that may be short-lived as we now have 49 positions open, only 1 of which is a put and just 7 of which are hedged.  That leaves us 20% invested and 85% bullish as I did not set stops on the calls so they are all hanging out there in a very scary way.  I still intend to get to 90% cash so I will be taking the opportuntiy today to address this issue now that I’m back.

Our other virtual portfolios lost a bit of ground in mixed performance as they suffered a bit from lack of attention but, on the whole, they held up very well on my vacation.

The Long-Term Virtual Portfolio finished up 171% with 35 positions open.  Like the STP, it is hopelessly optimistic as almost all the puts stopped out leaving 31 leaps completely naked.  With luck we’ll have an up day and I can do a review later but, if not, I’ll do my best to hit the intraday calls as I sell them.

The $10,000 virtual portfolio stands at $13,976, up 39%, which is a great relief to me as they were not well hedged last week and we will see how our 6 remaining positions look this week.

Complex Spreads made small progress up to 170% with 14 positions remaining open.  These positions are no longer complex and I may decide to break up this folder so we can initiate new condors and butterflies where they belong.  Certainly some of the more conservative strategies seem prudent at this point!

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Was Last Thursday The Bottom?

 Need a mood-boost before the markets open?  How can anyone be down seeing “shiny, happy people having fun”?!

Trivia Question?

Since mid-July the Dow is down 6.6% from its high of 14000.  Which currency shares are up almost the exact same amount in the same time period?

Answer:  It is the FXY (Currency Shares Japanese Yen Trust).  Bloomberg reports that “The yen gained versus all 16 major currencies this week as the carry trades unwound”. 

Bloomberg also reports that “Economists forecast the Bank of Japan will refrain from raising interest rates next week after the global subprime and credit turmoil.”  Meanwhile on this side of the Pacific, the fed funds futures contract is pricing in a 100% probability of a cut in the fed funds rate on September 18. 

The expectation is for a 25 basis point cut with a further cut in future months.  This follows the recent 50 basis point cut by the Fed in the discount rate – the rate it charges banks for direct loans.  The Fed Chairman has been attacked for his steadfast approach in maintaining the sub-prime mortgage rout was contained before his concession on Friday that all was not as he purported it to be.  “It was a rookie mistake,” said Kenneth Thomas, a finance professor at the University of Pennsylvania’s Wharton School in Philadelphia. The Fed “underestimated liquidity needs” of investors and the fallout from the housing recession, he said, adding, “This demonstrates the difference between book-smart and street-smart.”

In Europe, speculation was rife just a few weeks back that the rates would be hiked again, but recent liquidity injections have poured water over those flaming rumors.  If interest rates do continue to rise around the world but fall in the US, the dollar may indeed reach the forecasts set by some analysts of $1.50 against the euro within 12 months.  Is it time to bid Adieu or maybe Sayonara to the dollar?  I prefer Auf Wiedersehn…it implies we may see the dollar again one day in the future reclaiming its old glory!…
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Weekly Wrap-Up

Are we there yet?

It's hard to see a bottom except in retrospect.

I prefer to call tops because you can cash out of a top with a profit (one would hope) but a bottom requires you to make a commitment, to put your precious cash back in play, putting a large leap of faith in a market that has been handing out naught but suffering to it's followers.

We started the last week with my comment to members Sunday night: "Cash, cash, cash and, when in doubt, buy some cash. I just put up a post re the value of waiting the storm out and I did mention my virtual portfolios are up but they are still 80% cash. I do not regret any money I didn’t make last week as the correct course of action is still to wait in cash in look for bargains.  It’s really hard to be a bear when the Federal government is bailing out the bulls but we have to watch the data and see what kind of mood the market is really in.  It would take very little to push this boat over the edge!Happy echoed my sentiments Monday morning saying: "As always, please pay attention to the overall market conditions and keep cash!  I think we should still be patient and wait for the market to confirm a double-bottom!"

Our long standing target for this correction had been 12,500 and we kind of/sort of got there on Thursday but a little too briefly to make us feel really good about it as the Fed screwed up what was shaping up to be a nice consolidation around 12,600, which would have been a perfect 10% correction off the top.  While I can understand the terror of letting the market slip below the 10% rule, I think forcing a bounce destroys a healthy, natural venting process that gives us a healthy base for the next leg up.

The ECB and BOJ continued to inject cash into their systems and Happy wisely wasn't buying the "rally" on Monday and Tuesday caused Sage to state: "Today the Fed abstained from injecting liquidity and we saw the result. Personally, I hope for some panic selling so we can shake out the last of the nervous investors clinging by fingertips to existing positions. Time will
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Phil's Favorites

Are Stock Buybacks Driving Wealth Inequality?


Are Stock Buybacks Driving Wealth Inequality?

Courtesy of 



It’s not lost on me that we’re posting this on a day where the S&P 500 trades above 3100 for the first time…

Ben Hunt joins Michael Batnick and Downtown Josh Brown at The Compound to explain what he’s so angry about – he sees wealth inequality as being driven by hijacked narratives about capitalism, stock buybacks, central banks and the managerial overclass orchestrating it all.


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Zero Hedge

The Inevitable Finale Of The Nord Stream 2 Saga

Courtesy of Venand Meliksetian,

Europe is quickly becoming one of the most important export destinations for gas exporters. Production is decreasing quickly due to political and technical developments. The next few decades are promising for exporters. Nord Stream 2 is arguably one of the most contentious projects currently under development. Denmark recently granted the last necessary permit to start construction activities in its EEZ and analysts now agree that the project’s completion is only a matter of time. In reality, the pipeline’s future was decided long before construction even started due to external factors such as Poland’s decision to d...

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The Technical Traders

What happens To The Global Economy If Oil Collapses Below $40 - Part II

Courtesy of Technical Traders

In the first part of this research article, we shared our ADL predictive modeling research from July 10th, 2019 where we suggested that Oil prices would begin to collapse to levels near, or below, $40 throughout November and December of 2019.  Our ADL modeling system suggests that oil prices may continue lower well into early 2020 where the price is exp...

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Insider Scoop

What Wall Street Thinks Of Google Cache

Courtesy of Benzinga

Alphabet, Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL) subsidiary Google announced a new partnership with Citigroup Inc (NYSE: C) to launc... more from Insider

Digital Currencies

Is Bitcoin a Macro Asset?


Is Bitcoin a Macro Asset?

Courtesy of 

As part of Coindesk’s popup podcast series centered around today’s Invest conference, I answered a few questions for Nolan Bauerly about Bitcoin from a wealth management perspective. I decided in December of 2017 that investing directly into crypto currencies was unnecessary and not a good use of a portfolio’s allocation slots. I remain in this posture today but I am openminded about how this may change in the future.

You can listen to this short exchange below:


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Kimble Charting Solutions

Silver Testing This Support For The First Time In 8-Years!

Courtesy of Chris Kimble

Its been a good while since Silver bulls could say that it is testing support. Well, this week that can be said! Will this support test hold? Silver Bulls sure hope so!

This chart looks at Silver Futures over the past 10-years. Silver has spent the majority of the past 8-years inside of the pink shaded falling channel, as it has created lower highs and lower lows.

Silver broke above the top of this falling channel around 90-days ago at (1). It quickly rallied over 15%, before creating a large bearish reversal pattern, around 5-weeks after the bre...

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Chart School

Gold Gann and Cycle Review

Courtesy of Read the Ticker

Gold has performed well, golden skies are here again. In fact it has been a straight line move, and this is typically unusual and a pause can be expected.

It seems the markets are happy again, new highs in the SP500, US 10 year interest rates look to re bound, negative interest may soften. The US FED has reversed their QT and now doing $250BN (not QE) repo. The main point is the FED has stopped QT, and will do QE forever. The evidence now is the FED put is under market risk and the possibility of excessive losses do not exist. 

Point: If in future if there is market risk, the FED will print it's way out of it.
Subject To: In this blog view. The above is so until the amount required rocks confidence in the US dollar as a reserve currency.&n...

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Lee's Free Thinking

Today's Fed POMO TOMO FOMC Alphabet Soup Unspin

Courtesy of Lee Adler

But make no mistake, if the Fed wants money rates to stay down by another quarter, it will need to imagineer even more money.

That’s on top of the $281 billion it has already imagineered into existence since addressing its “one-off” repo market emergency on September 17. This came via  “Temporary” Repo Man Operations money, and $70.6 billion in Permanent Open Market Operations (POMO) money.

By my calculations that averages out to $7.4 billion per business day. That works out to a monthly pace of $155 billion or so.

If they keep this up, it will be more than enough to absorb every penny of new Treasury supply. That supply had caused the system to run out of money in mid September.  This flood of paper had been inundati...

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The Big Pharma Takeover of Medical Cannabis

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


The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:


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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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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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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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