Archive for 2008

Weekly Wrap-Up

It was a fairly miserable week in the markets with a very miserable ending so we’re not going to dwell too much on it.

On the whole, the market finished the week just 100 points below where it began and down 200 points from Jan 31st’s open at 12,438 (but that day we spiked down to 12,200).  We also broke below 12,200 on each day from 2/6 through 2/11 and again on the 20th and 22nd.  The only reason Friday’s drop was particularly stinging is we allowed ourselves to hope we were pulling out of the market funk after 600 points of gains in 4 sessions from last Friday through Wednesday.

Looking at a 3-month chart doesn’t make things seem quite as alarming and a 5-year chart makes you really wonder what all the fuss is about as we climbed from 7,500 to 14,000 and now we pulled back to 12,000, still up 60% in 5 years and merely having given back 2,000 of a 7,500-point gain (26%).  Charts are all about perspective and you can read them with a positive or negative spin depending on the media.

One week ago, I said a sell-off to 12,250 was overdone and here we are back at that point so Monday will be a critical test of the global panic button – How low can the dollar go and how much is this really going to affect the US markets and are US equities still the "least sucky" place to put money in ’08.  On Wednesday, the 13th, we traded down to 12,216 ahead of the St. Valentine’s Day Massacre and Monday we are virtually certain to retest that low!

I set the theme for the week on Monday with an update of my old "Inflation Nation" article with very little having changed from the time I first published it in 2006.  That was our theme for the week as runaway US inflation, led by $103 oil, played havoc with the markets and I’ve never been more sorry to be right on the button as I was this week as the market was ransacked by inflation fears.

On Monday we noted the WSJ showed economists had a very dreary economic outlook for the year yet the Business Council found that 96.4% of US CEO’s do NOT see a recession in ’08.  The question is – Are they insane or…
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Wise Words From Jesse Livermore!

The picture shown below is of Donald Trump speaking at The Learning Annex.  At the forum, speakers educate hopeful investors on how to become successful in real estate and in the stock market, how to protect their assets and how to start businesses.  Trump has said in the past that one comment he always makes at the events is that not everybody in the room will become a successful investor.  While the Learning Annex team must hate the comment, Trump makes the claim because he believes successful investors have an inherent quality that leads to their success.  That quality is mindset.

 

Trump argues that mindset separates successful investors from unsuccessful investors and that it is an innate skill which is difficult to learn.  In the stock market, mindset is especially critical to successful trading.  You must have an ability to think independently when trading the stock market because forces tug regularly at your emotions.  Can you imagine buying a property and subsequently turning on the TV to see analysts contend that you made the best decision of your life and others arguing that it was a very poor decision that will certainly lose money?  In stock market trading, that is exactly what you have to contend with each and every day.  The drain on emotional capital is too much for many to succeed. 

A famous story of Warren Buffett recounts how he reacted nonchalantly to news that the 1987 crash was in full swing.  He wasn’t bothered by the event in the least because he understood the value of his investments and he had internalized one of the most important trading quotes ever!

"There is nothing more important than your emotional balance" – Jesse Livermore

Emotional balance is critical to successful stock market trading.  With conflicting reports released daily on most stocks in your virtual portfolio, you must have the courage of your convictions in your analyses.  You must be prepared for shocks and surprises.  It’s easy to think ourselves great traders when the stock market rises, but successful traders separate themselves from the crowd by knowing how to preserve capital, minimize losses and/or generate profits during downtrends. 

With the stock market gyrating wildly, how can you maintain emotional balance?

The Beta Coefficient is a measure of a stock virtual portfolio in relation to the rest of the financial market.  Knowing the beta values of stocks in your virtual portfolio is a first step…
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Sprint Nextel fallout gathers pace as analysts trim expectations

Today’s tickers: S, VIX, TIE, AAPL, BAC, DELL, DF, NTAP, MF, CTXS & ATHR

SSprint Nextel. There was no hiding the disappointment behind a sizeable broader market sell off. While earnings yesterday were sloppy and accompanied by a huge goodwill write down related to the 2005 merger, analysts today reeled in response to the news that customer defections are at a three-year high with one noting that growth for the company isn’t on the agenda until 2010 at least. In response Sprint Nextel’s share price slid a further 9% to $7.39 and further induced bearish option plays. In the January contract, it appears that the 10.0 strike calls may well have been sold 16,000 times at around a premium of $1.00 in exchange for a hunt for downside reward at both 5.0 and 2.5 strikes. The former traded 11,800 times at 0.80 while the 2.50 strike jumped to trade at 0.25 some 5,100 times. With a worsening in the economy being priced in day after day, the pressure on this telecommunications company at least is reminiscent of the collapse of the sector in the recession of 2001. Option traders apparently are in no mood for a rally.

VIX CBOE volatility index. Option traders in the volatility pit are in no mood for optimism today. Calls on the index in the March contract were bought at all strikes from 25 through 35, while puts from 25 through 20 were unceremoniously dumped. It was a loud shriek from traders that today’s sell off might not mark a one-off decline, but that nasty conditions might be here to stay. Even extending their time horizon to the April contract, investors bought calls at the 32.5 strike at around a premium of $0.90. While the VIX has spent little time actually trading above a level of 30 in 2008, those calls would still appreciate if the VIX even rallied towards 28. The market does feel as if it’s positioning for a sizeable move.

TIETitanium Metals Inc. disappointed investors late Thursday with an earnings-miss and so became the largest decliner in the S&P 500 index Friday morning. Option volume of 27,000 represented around one-in-four of the existing open interest in the stock options with what looks like a sold strangle at play in the April contract. The company specializes in the manufacture of titanium-related products for use in the aerospace…
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Leap Day

Of all the months to have an extra day in it, why did it have to be this one?

This has been a torturous month to play the markets and making us spend one more day in it is just cruel at this point.  I mentioned in last night's post how deeply concerned I am about the dollar's continued decline and when I see things like that I want to go to cash and I very much doubt I'm the only trader who feels that way.  Unless we see a recovery in the dollar, it's going to be very hard to make a good case for US equities as we are down 20% from last year in foreign currency

Of course 20% would be an ideal bounce zone but it's also a terrible level to lose and breaking 12,500 again is a pretty good indicator that we have another bottom test in store for us.  Let's hope we can hold it today as 12,500 is up 100 for the week and we'll take it, but we're not going to like it!

Asia sold off last night as Bernanke's comments yesterday about possible US bank collapses for some reason made investors a little uneasy.  The Nikkei gave up 2% and the Hang Seng dropped just 1% (still 260 points!) and Europe is trading off about a point as the Euro hits $1.52, getting close to a double over the past 6 years!    Now there is ample grist for the rumor mill and AIG's surprising $5.3Bn loss on an $11Bn write-down of mortgage securities is not helping this morning.

We have AIG in our virtual portfolios and we pretty much expected this so we're going to take out our callers and be very happy it was "just" $11Bn and the key phrase is: "AIG said the unrealized valuation declines aren't indicative of the actual losses the unit may realize over time. Any credit losses that do occur in future won't have a big effect on AIG's overall financial condition."

This is why we bought August and sold March!  While it is possible that there may be some more write-downs if the government continues it's do-nothing policies and the housing market continues to collapse, this represents a net $5Bn
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Thursday Dollar Thump

I’ll keep calling the Thursday wrap-up "Thursday Thump" until everyone starts recognizing a pattern!

Two weeks ago it was the St. Valentine’s Day Massacre that caused the drop as we fell from 12,550 at the open to 12,350 at the close while people talked about how crappy the economy was.  Last Thursday we fell from 12,500 to 12,250 as the Philly Fed Index fell to -24, the lowest reading since 1991.  This week, it was Bernanke's surptising statement that some smaller banks may fail that shocked the markets even though the only real surprise was that Ben actually said it.   That coupled with news that Moody's was downgrading some banks was all it took to send the market down 112 points for the day.

Financials finished the day down 3% and oil finished at $102 after touching $103 and the energy sector gained 1.5% otherwise we could have gone down 300 easily.  The dollar plunged to a new all-time low as Bernanke spoke this morning, closing at a shocking 73.5.  I'm tempted at this point to go back to cash but cash has fallen almost 5% since Feb 10th so I'm not even sure that's a good idea!  While we are having fun with day trades our new virtual portfolios are still in the red.  With gold at $972 it's getting hard to paint a sunny picture here and I'm concerned we are in for another correction befroe we turn the markets around.

I didn't think the dollar would break 75 and a lot of the equations are going to change if we fall any lower as we have to start looking at US earnings from a foriegn perspective and realize that IBM's 14% gain in dollar revenues is a gain zero when benchmarked against foreign currencies.  The dollar is off 14% from Q1-07 so a US company has to make 14% more money just to stay even for an international investor to get his money's worth. 

My premise that our markets would hold the line here assumed some kind of Central Bank intervention to prop up the dollar at 75, followed by an end of Fed easing and a gradual revaluation of our currency.  I'm actually surprised that the reso of the World seems content to let us twist in the wind but, as I mentioned


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GDPhursday

How crappy is our economy?

We find out this morning as we get our Q4 GDP Revision but don't worry, I already have the results (preliminary) and I thought it would be fun to post these up ahead of the actual so don't look if you want to be surprised later:

Contribution to Percent Change In Real GDP

Contribution to Percent Change In Real GDP
             
             

 

Q4-07

Q3-07


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Wednesday Wrap-Up

An Apple a day makes Dr. Bernanke go away apparently!

We have one happy group of traders at PSW as Apple is one of our "core" holdings and we've been loading up on this recent dip.  While we are not yet ready to declare victory (that comes at $150) we are certainly in a very good mood seeing them make a huge turn today.  The big move came after hours today as Tim Cook (COO) made a presentation at the GS Technology Investment Symposium and effectively negated all the BS that's been used to take the company down the past month.

Companies like Apple and Google that have policies of not talking to the press between official releases are favorite targets for hyenas, who have no such restrictions and spread rumor and innuendo with impunity as people like Bill Ackman can be spectacularly publicly wrong in their attacks knowing that they will still be invited on CNBC and treated like an expert the next time they want to assasinate a company they are short on and they can sleep soundly in their beds knowing the SEC is also asleep at the wheel.  Even a blatant fraud like Henry Blodget (who was rated the #1 Internet/eCommerce analyst by TheStreet.com in 2000) is still treated like a venerable analyst by the media but, then again, so is Cramer.

Speaking of CNBC, I love the Fast Money Recap from Tuesday night: "Google GOOG fell today on news that clicks on its site, a source of revenue for the company, were flat or down. Macke predicted that the next CEO will reduce headcount. He added that Apple AAPL hasn't been working. He advocated avoiding the two stocks.  Adami noted that Google at $513 has typically been a good level to trade around. He cited a new algorithm as a potential catalyst and called it a value stock at 18 times forward earnings. Najarian said he'd wait to see institutional money in the name." 

Yes, by all means, don't buy until everyone else does!  With advice like this it's no wonder traders are losing their shirts this month.  If you listen to the media when they tell you to panic on the dips and wait until everyone is back on the bandwagon
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March call-holder gets wary after Delta-Northwest talks hit snag

Today’s tickers: NWA, NRG, XLNX, CSCO, PHM, TOL, NOC, FNM, FRE, XLB, ADSK, JEF, NSM

NWA – Shares in Northwest Airlines skidded nearly 7% to $14.92 in afternoon trading on news of a snag in its merger talks with Delta. The road bump concerns talks with both carriers’ pilots’ unions over job seniority after the integration of the airlines. The development looks to have spurred at least one major holder of those infamous March calls (“pegged” by option traders since last fall as a likely timeline for airline consolidation) to sell out at the 17.50 strike for 25 cents – a substantial discount from yesterday’s levels – and possibly roll the position into a more moderate call-spread position in the June contract between strikes 15 and 17.50. If this is indeed a bullish trade amended into a long call spread, as we suspect, the trader would have bought the June 15 calls for $2.65 while selling the 17.50 calls for $1.60, opening the transaction with a $1.05 debit that renders profit for the buyer if Northwest shares reclaim the $16.05 mark – but selling the upper strike means capping the upside. The rollover of this single position sent option volume in Northwest to 36 times the normal level.

NRG – Earnings are due out from diversified energy company NRG Energy tomorrow, and it’s in anticipation of those earnings and a 2% decline in share price to $40.52 that we find options trading at 53 times the normal level. While NRG topped the Wall Street Journal’s list of stocks bought on weakness today, it looks like option traders took the opportunity to sell off the equivalent of nearly all the open interest in March 40 calls. These were sold for about $2.20 apiece as premiums came off by about 25% in value due to the share price decline. Most of the open interest here was opened at $2.80 on January 8, so closing with a sale now would yield a loss. We also observed put-buying in the January 2010 contract at $1.15 – a striking move in an out-of-the-money put with plenty of time value but a tiny delta suggesting just a 7% chance that NRG shares will lose half their value over the next 2 years.

CSCO – Shares in Cisco bounced 3% to $24.81 following “buy” recommendations of the company’s stock by Wells Fargo and Citigroup. The move…
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Worrisome Wednesday

It’s up to Ben Bernanke to save the markets!

If that statement doesn’t inspire you with confidence, you’ll understand why, at 3:05 yesterday, with the Dow still at 12,700, I said: "Good time to pick up DIA $127 puts and QID $50s for overnight protection. XXX"  Hopefully we won’t need it as badly as the futures are indicating but it sure is nice to have isn’t it?

Durable goods orders fell 5.3% in January, a big recessionary signal but, like the PPI, this is a snap-back from an unbelievable 4.4% increase in December, when the government was pulling out all the stops to punch up the Q4 numbers.

Durable goods reports are insanely volatile and the WSJ points out that the ISM numbers were up from 48.4 in December to 50.7 in January, a much more likely indication of a bottoming move.  Shipments of durable goods ROSE 0.1% for the month (a GDP component) so we are down but not out…

As a corporate manager, given the fear and panic we were subjected to in January, don’t you think you might have held off a little when you were asked to consider making major equipment purchases?  The Dow plunged from 13,550 at Christmas to 11,634 on Jan 22nd (down 25%) and Durable Goods orders ONLY fell 5.3% – sounds like a market overreaction to me!

[chart]Of course we also have the stunning (but expected) decline in home prices as the average American home lost 8.9% in value from the previous year but don’t worry, George Bush is going to send you $600 to make it all better!  As we’ve mentioned before, the administration’s "Free Market" solution is a total disaster as all they have managed to do is allow the Banks to increase their mortgage "crack spreads" from 1.5% last year to 3.5% this month, more than doubling their profits per loan.  Conforming loans are the same price now as they were when the Fed Funds Rate was 5.25% and Jumbo loan rates have actually gone UP almost a full point – good luck with that refi when your home is down 10% in value and rates are up!

While I’m furious at this administrations handling of this mess, I’m just as mad at Clinton and Obama after last night’s debate for their utter failure to steer the debate towards something substantive.  NAFTA and national security…
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Tuesday Top Off – Europe Ascending

All right, now we're making some progress!

Not with the indices, who cares about them – I'm thrilled that we chased 23M people out of Google today.  In what may have been their busiest day since their IPO, 10% of Google's shares were sold and, shockingly, bought as close to 10% of the float changed hands.  Google is 80% owned by institutions and, as we noted last night, they weren't selling

Also significant is Google's bottom today at 299.99 – Euros, that is.  That's the point at which buyers starfted swarming in, just another indication of how the dollar, even as it relates to stock prices, no longer matters in International trading and technical traders better learn how to do their conversions if they want to get a clear picture of what's going on with a chart.  You can't analyze a stock if you base it on an unstable currency!

If you look at the chart of the S&P in real money, you'll see that the trend line has been far from baffling as we've simply been following the 50 dma lower and lower since our October highs with a very brief breakout attempt in December (courtesy of the Fed).  What looks to be, in dollars, a surge in the S&P back to the 50 dma at 1,392 over the past 3 days is merely a flatline to Europeans.  The good news is we are nowhere near our Jan 22nd lows and have put in a fairly orderly consolidation since then, staying in a tight 4% range, almost half of the 7% range we've seen as measured in dollars.

So it's no surprise the VIX is coming down hard, volatility washed out weeks ago – we're just the last ones on Earth to get the message!  I'm not saying we are unbound by US technicals but let's keep in mind that, as we drift lower and lower as an economic power, the power of our charts to sway International investors diminishes as well.

The Dow, meanwhile, stopped dead at the 50 dma of 12,688 today as gold and oil both gained about 1% ahead of Helicopter Ben's testimony tomorrow.  We're touching $1.50 to the Euro and that is just…
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Zero Hedge

Enemy Of The People?

Courtesy of ZeroHedge. View original post here.

Via The Zman blog,

There has never been a time when normal people did not know the media was biased and biased in a predictable direction. For every non-liberal in the media, there were at least ten liberals. The ratio was probably higher, but then, as now, some lefties liked to pretend they were independents or some third option.

The media used to invest a lot of time denying they had a bias and an agenda, but the only people who believed them were on the Left, which had the odd effect of confirming they had a bias and an agenda.

...



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Phil's Favorites

A 2019 Earnings Recession?

 

A 2019 Earnings Recession?

Courtesy of 

Shout to Leigh!

On the new Talk Your Book – Josh Brown is joined by Leigh Drogen of Estimize, one of the leading providers of crowdsourced financial and economic data to talk about the trend in corporate profits that could potentially lead to an earnings recession later this year.

What is the thing that Leigh is seeing in the data that Wall Street isn’t yet picking up on? What segment of the stock market is most at risk? Why is the crowd smarter than the narrow consensus of Wall Street analysts?

Check out Estimize ...



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ValueWalk

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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Kimble Charting Solutions

Gold & Silver Testing Important Breakout Levels!

Courtesy of Chris Kimble.

Gold and Silver from a long-term perspective have created a series of lower highs over the past 8-years. Will 2019 bring a change to this trend? A big test is in play!

Gold since the lows in 2016 has created a series of higher lows, while Silver may have created a double bottom.

Gold & Silver are currently facing break attempts a (1) and (2). These falling resistance lines have disappointed metals bulls for the past few years.

The direction of Gold and Silver weeks and months from now should be highly influenced by what each does as they are attempting to break above important resistance levels.

To become a member of Kimbl...



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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 ...

http://www.insidercow.com/ more from Insider

Digital Currencies

Russia Prepares To Buy Up To $10 Billion In Bitcoin To Evade US Sanctions

Courtesy of Zero Hedge

While the market has been increasingly focused on the rising headwinds in the global economy in general, and China's economic slowdown in particular, while the media is obsessing over daily revelations that Trump may or may not have colluded with Russia to get elected, a far more critical, if underreported, shift has been taking place over the past year.

As we reported in June, whether due to concerns over draconian western sanctions and asset confiscations following the poisoning of former Russian military officer Sergei Skripal, or simply because it wanted to diversify away from the dollar, Russia liquidated virtually all of its Treasury holdings in the late spri...



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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 failure based on his personality, which was evident years ago. This article, written in 2017, references a prescient article Bill wrote before Trump became president, in July, 2016, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

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 www.shutterstock.com

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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OpTrader

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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Promotions

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.

Market Shadows >>