Phil's Newsletter

Thursday Failure – Warning Lights Flashing on our Market Dashboard

chartWe're still painting the bounce lines red 

As I warned you on Tuesday, there's blood on the streets and we have now picked up 4 red boxes as each index has been taken down a notch this week and, with the Nasdaq (/NQ) failing it's 10% correction AGAIN at 6,870 and the Russell (/RTY) right on the -10% line at 1,495 – will the Dow (/YM) and S&P (/ES) be far behind?  For the Dow, that's a 700-point drop to 24,300 and the Dow (/YM) futures pay $5 per point per contract so I love shorting /YM below the 25,000 line with tight stops above.  

  • Dow 24,300 with a weak bounce at 24,800 and a strong bounce at 25,300
  • S&P 2,640 with a weak bounce at 2,710 and a strong bounce at 2,780
  • Nasdaq 6,870 with a weak bounce at 7,080 and a strong bounce at 7,230
  • Russell 1,485 with a weak bounce at 1,530 and a strong bounce at 1,575

For the S&P (/ES) we're at 2,696 this morning so another 56 point-drop and we're all red on that index too.  On the other hand, if /ES can get…
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Wobbling World Wednesday – Global Indexes Consolidate for the Next Move Down

Reuters GraphicI think we're heading lower.

Probably about 10% lower and yesterday's 8% drop in oil is a good indicator of how fast the "value" can come out of the markets – or any other asset you think is "stable" these days.  There are still MANY signs of Global Economic Weakness, including Japan's negative GDP, which we noted yesterday.  Even worse, Japan's Central Bank owns $5Tn worth of assets – the entire GDP of the country, including 45% of all Government bonds paying near 0% interest that will quickly become worthless if rates rise.

“The Bank of Japan’s policy is clearly not sustainable. The BOJ would suffer losses if it would have to raise interest rates to, say, two percent,” said Hidenori Suezawa, a fiscal analyst at SMBC Nikko Securities. “Also, in case of emergencies, such as a natural disaster or a war, the BOJ won’t be able to finance government bonds any longer.”

The BOJ has also been a very aggressive buyer of Japanese stocks and is now the largest holder of most of the Nikkei 225 stocks – over 10% on average.   This buying spree pushed the Nikkei up from 16,000 when Abe and Koroda unleashed this mad shceme in order to reverse that 20% correction.

Well, what if the 20% correction was correct and Japanese stocks, in an aging population with Government debts that exceed 250% of their GDP, are really only worth Nikke 16,000.  That means that, at 24,000, 33% of the money the BOJ spent to prop up the market was wasted and that's very likely the case as the BOJ shouldn't have to be a buyer and their actions created a false sense of demand for Japanese stocks and artificially raised the prices and those prices, in turn, encouraged other Global markets to move higher and now the whole World is a good 10% (still) too expensive but Japan has barely corrected 10% and easily has another 10% to go (19,500) before anything like real buyers begin to show up.

Image result for japan bubble 2018It's not even possible for the BOJ to
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Testy Tuesday – Painting the Bounce Lines Red

Image result for trump red queenWe're painting the bounce lines red

That's not a good thing but, when the Mad Queen is your President, you just have to go wtih the flow and deal wth the daily mood swings.  This weekend, to honor Veterans Day, Trump dissed the veterans on several occasions and pissed off our allies in the process and then he blamed poor management for the forest fires in Malibu – which is a beach, not a forest.  

Meanwhile, it was a wake-up call to investors to see Trump walk out of a G20 conference and then pull a complete no-show at the 100th anniversary of Armistice Day, which is practically a holy day in Europe as it maked the end of a very bloody conflict in World War I.  Trump is too busy trying to start World War III to take time out to honor the victims of World Wars I and II.  

Meanwhile blood is being spilled all over our bounce lines as they cascade back to red:

  • Dow 24,300 with a weak bounce at 24,800 and a strong bounce at 25,300
  • S&P 2,640 with a weak bounce at 2,710 and a strong bounce at 2,780
  • Nasdaq 6,870 with a weak bounce at 7,080 and a strong bounce at 7,230


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Monday Market Madness – Trump Leaves G20 Early, Skips Asia Summit Entirely

Oh what a beautiful morning!  

We went long on Gasolione (/RB) into the weekend as we expected OPEC to do SOMETHING to prop up Oil (/CL) at the $60 mark and we thought /RB Futures would make a good play into Thanksgiving regardless.  We did, in fact, get noise over the weekend that our freinds the Saudis see the need to cut oil ouput by another 1Mb/d next year to maintain "price stability".   

I had predicted we'd get down to $62 when I was interviewed on Nov 1st at Investing.com, but our first attempt to go long on oil and gasoline failed but this time /RB made the big payout with an almost $5,000 gain on 6 long contracts as we stopped out our last contracts at $1.64 - a nice way to start our week…

The next long attempt can be made over $1.65 on /RB or back at the $1.625 line and, of course, we'd love to give $1.60 another try but you have to use tight stops on Gasoline as the contracs pay OR LOSE $420 per penny of movement on each contract.

When you get a strong move based on a quote – even from a very reliable source – you have to look to take quick profits because, as is the case with Gasoline – nothing has Fundamentally changed – just some Saudi Oil minister says (while oil is failing $60 and US inventories alone are climbing by 5Mb/week) that they "might" need to cut Global Production by 7Mb/week – a month from now – if the other OPEC members agree. 

So, for future reference (and we've done this before but it's like school, I have to repeat things many times before a light bulb appears above the students' heads):  OPEC (now called the new and improved OPEC+ in an effort to rebrand and include Russia, Mexico and Kazakhstan) generally acts to support oil at $60 ($70 for Brent) like it's an emergency so wherever Gasoline is at the time tends to benefit as well and especially when you have a major down move, you can play the 5% Rule™ for a bounce:


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Faltering Friday – Market Tries to Reconcile Election, Fed, White House Turmoil

Image result for china cyber crime cartoonAll kinds of stuff is happening.

At the moment (7:30) the futures are down a bit but not very much and we're still holding those huge gains from Wednesday – so all is well (ish).  There's new tensions with China as the NSA says Chinese Internet stocks are violating a 2015 Cybersecurity Agreement regarding intellectual property theft and that's a charge that should, techincally lead to even more sanctions against China.  Most likely, this is one of Trump's "negotiating tools" as he prepares for trade talks with Xi – another chip he has to bargain with.

Still, real or fake, these accusations are having very real effects on Chinese cyber-stocks, which are all heading lower pre-market, including AliBaba (BABA) who we would like to play bullish into their "Singles Day" on Sunday, but now we'll have to wait and see how the morning plays out.  Don't forget, Trump's unilateral sanctions are illegal unless he can cite "National Security Issues" and, if those don't exist – just make them up!  

Image result for trump no collusion cartoonWe're going to chalk up the timing of these charges, right before BABA's "Singles Day" and the fact that BABA's Jack Ma is critical of Trump's trade policies to be just another coincidence in Trumpland – where there's never any collusion – just many, Many, MANY coincidences…

China is, in fact, holding a massive International Import Expo this week and all of their Global Trading Partners are there – except us.  Our decision not to trade with the World's second-largest economy has opened up China to the rest of the World, who are thrilled to rush in and fill the voil – much like other countries rushed in to fill the voild of OPEC's cutbacks – and now oil is collapsing, down below $60 just a year after OPEC cut production.  Feel free to draw your own parallels…

Getting back to China, according to Bloomberg, there are 50M (22%) EMPTY Chinese homes, mostly homes that have been bought solely for speculation but the problem with that is, in a down market, those homes could flood the market into no demand and crash housing prices for everybody…
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Fed Fired Thursday – Sessions Gone, Powell Speaks

Image result for trump nixon cartoonNow Trump has gone full Nixon.  

Trump finally fired his whipping boy, Jeff Sessions and, while we may forget it because he's become a National joke, thanks in large part to the way Trump has demeaned him for two years, he is/was the Attorney General of the United States of America and firing him is a big deal. And Trump's reasons for firing him are very similar to Nixon's reason for firing AG Archibald Cox in the summer of '73 — to derail an investigation into the President's corrupt dealings

Like Nixon, Trump is placing a loyal stooge in Sessions' place (one who is not technically qualified to be the AG, in fact). Acting AG, Matthew Whitaker, was hand-picked by Trump and was once a US Attorney in Iowa but then joined the board of World Patent Marketing in 2014 saying:

“As a former US Attorney, I would only align myself with a first class organization. World Patent Marketing goes beyond making statements about doing business ‘ethically’ and translates them into action.”

The Federal Trade Commission last year accused World Patent Marketing Inc., of Miami Beach, Fla., of scamming would-be inventors by charging them thousands of dollars to patent and promote their inventions. The company “provided almost no service in return” and threatened people who complained, the regulator said.

The FTC alleged that the scheme, which it said was promoted through “bogus ‘success stories’ and testimonials,” began in early 2014. The agency found that consumers lost about $26 million; some allegedly ended up in debt or lost their life savings.

World Patent Marketing promotional videos and photos show Mr. Whitaker reviewing invention ideas with the company’s founder, and the FTC included in court exhibits an email from Mr. Whitaker acting on behalf of the company and threatening a customer who complained with potential “serious civil and criminal consequences.” The August 2015 email was reviewed by The Wall Street Journal.

Image result for trump sessions cartoonUsually something like that in an attorney's past would immediately derail any chance they had of becomming the Attorney General of the United States of America but this is the Trump Administration where consumer
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Which Way Wednesday – Trump Bloviates but Powell Will Have the Last Word

Is this guy delusional or what?

The Republicans got trounced in the House but kept the Senate and Trump calls it a "Big Victory" though I do have no doubt that his friend Putin did congratulate him – so maybe that part is true.  So far, the markets seem very happy with a split Congress and we're back to the 7,100 line on the Nasdaq but that's only our weak bounce line (7,080) and we're still waiting for the Nasdaq and the Russell to confirm strong bounces and, of course, the others need to hold theirs for two consecutive days or we'll have to reset the clock on them as well.  Our bounce lines are:

  • Dow 24,300 with a weak bounce at 24,800 and a strong bounce at 25,300
  • S&P 2,640 with a weak bounce at 2,710 and a strong bounce at 2,780
  • Nasdaq 6,870 with a weak bounce at 7,080 and a strong bounce at 7,230
  • Russell 1,485 with a weak bounce at 1,530 and a strong bounce at 1,575


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MidTerm Tuesday – Throwing the Bums Out (hopefully)

Related imageIt's election day.

Time to erase a huge mistake that was made in 2016 or time to push America further down the path to Facism – I wonder what my fellow countrymen will choose.  If we do nothing about Global Warming for another two years – I don't think it will matter much who's in charge during America's last century, will it?  So I guess we have that to look foward too – a slow, burning extinction that erases this whole mess of species from the annals of Galactic History, just another start-up civilization that wasn't smart enough to make it.

Unfortunately, we are not likely to have a resolution today as many of the elections are so close, it will take days and maybe weeks to determine the winners.  Also, if the diffference in the House or Senate is just one or two seats, look for any close election to be challlenged.  That's the craziness that's ahead of us, plus the Fed has a statement out Thursday at 2pm and 3 Fed speakers Friday morning so we're not going to know a damned thing until next week for sure…

Meanwhile, on a bullish note, China is now saying they do want to talk trade some more – that should help a bit.  Oil collapsed to $62.50 as the Iraq Sanctions finally kicked in.  As I noted in yesterday's Morning Report, the sanctions are so weak they are not expected to affect the energy markets – just more smoke and mirrors from Team Trump.  Falling oil prices are a drag on the Dow and S&P but it's not likely we stay this low – especially into the Thankgiving Holiday.

So far, we've had a very mild correction with the S&P sitting 6.6% below its all-time high.  Unfortunately, it has to get back under 6% for us to call it a strong bounce, so we're still in "wait and see" mode ahead of the elections and the Fed.

We're well into earnings season and, for the first time since well before Trump was elected, more companies are revising their forecasts lower than
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Meaningless Monday Market Movement – Waiting on the Election

"Nothing really matters."

That's the tag line from Queen's Bohemian Rhapsody, which is this weekend's hit movie, about a band with an outspoken gay lead singer who was a teenage Indian refugee who was granted the political aslylum that Trump would deny to others.  To this day, a guy who died of Aids has Conservative Republicans stomping their feet and clapping their hands at sporting events around the nation singing "We Will Rock You" and "We are the Champions" to this day.   Life is strange…  

Nothing matters today as the election looms large tomorrow and nothing matters tomorrow as we have a Fed Rate Decision on Tuesday so today is completely pointless so let's just see what's been going on recently that might matter:

We have the Iran Sactions kicking in but there are so many exemptions to it that it's pretty toothless at this point.  Nothetheless, it's certainly pissing Iran off and now Trump's pal Kim Jung Un is also pissed off because the US has not honored their pledge to reduce sanctions on North Korea – who did scale back their nuclearl program ages ago – so why should Iran believe a word Trump says?  US Foreign Policy plans should go further than "kick over hornet's nests."

Will US voters repudiate Trump's policies tomorrow or embrace them?  Sadly, just a day before the election – we still don't know.  Aside from the election, there are many market-moving ballot initiatives around the country.   For example, Colorado voters will decide on increasing the buffer zones around oil and gas development and could eliminate new drilling in more than half the state. Energy producers have put about $40 million into defeating the initiative - more than is spent in many Congressional races.

Electric companies in Arizona and Nevada face potential new requirements to produce more energy from renewable resources such as wind and sola and a separate measure in Nevada will ask voters to approve opening a competitive retail energy market.  In Montana, a ballot measure would require state authorities to deny a permit for any new hardrock mines that would create “perpetual pollution,” while a Washington state initiative to impose the nation’s first fee on carbon dioxide has drawn high-profile support, including from the rock band Pearl Jam…
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Thank Trump it’s Friday – President Claims Deal with China is Coming

2,763! 

We are officially back to where we were on October 12th on the S&P 500 and still below where we were on the 19th, when I wrote: "TGIF – Closing out a Weak Week in the Markets," saying:

That's right, we opened on Monday at 2,763 and closed at 2,750 on the S&P (/ES) and this morning we're at 2,782 and climbing on a supportive note out of China, whose entral bank governor and banking and securities regulators said recent volatility in Chinese stocks didn’t reflect the nation’s economic fundamentals and “stable financial system.”

That flipped the Shanghai up 2.5% into the close, reversing a sharp downturn as China released weaker (6.5%) GDP data than expected (6.7%).  Chinese exports, by the way, held steady from last quarter as they are not, so far, being affected much by Trump's tarrifs, which is actually bad because that means that there's more potential trouble for their economy ahead.

So here we are again, two weeks later, a little worse for the wear yet people, including reporters who should certainly know better, are calling me on the phone and saying "can you believe this rally?"  Well no, I really can't believe it – it seems kind of unbelievable that we rally yet again on the same "progress" in China trade that both countries trot out to boost their markets when it suits them.  

Oct 19th was options expiration day and we  opened at 2,775.66, ran up to 2,797.77 and closed at 2,767.78 so we could have another interesting day ahead of us – especially with the Non-Farm Payroll Report coming out at 8:30 to povide us with real data that might move the market.  Our last Non-Farm Payroll Report was on October 5th, when the S&P opened at 2,902.54, up a little from the previous days close  despite a big miss in payrolls but we finished that day down 7 at 2,885.57 and we WISH we were less than 120 points (5%) away from that this morning.

Even China's beleagured
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Phil's Favorites

Life in South Africa's economic hub is improving -- but big challenges remain

 

Life in South Africa's economic hub is improving -- but big challenges remain

The Gauteng City-Region is home to a quarter of South Africa’s population. Mark Momberg

Courtesy of Julia de Kadt, Gauteng City-Region Observatory and Alexandra Parker, Gauteng City-Region Observatory

More than 14 million people live in South Africa’s economic hub, the Gauteng City-Region. That’s 25% of the country’s population.

A lot of media reporting and public discussion about Gauteng i...



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Zero Hedge

"It Was All A Lie": Homeless Vet, NJ Couple Charged In $400,000 GoFundMe Grift

Courtesy of ZeroHedge. View original post here.

A feel-good story about a New Jersey couple who raised over $400,000 to help a homeless good Samaritan - before they pilfered his GoFundMe account - was all a scam, a prosecutor said Thursday. 

39-year-old Mark D'Amico (left), 28-year-old Kate McClure (center) and 35-year-old Johnny Bobbitt (right) are facing theft and conspir...

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Kimble Charting Solutions

Gold Bugs; Would Love This To Be A Double Top!

Courtesy of Chris Kimble.

Gold, Silver, and the precious metals industry have a pretty simple relationship with the U.S. Dollar: They perform better when the Dollar is weakening… and they tend to struggle when the Dollar is strengthening.

One of our favorite ratios to monitor for Gold Bugs is the U.S. Dollar/Gold ratio. It tells us when the Dollar is weakening or heading lower (which is good for gold) or when it is strengthening or heading higher (bad for gold).

Looking at the Dollar/Gold chart below, we can see that the ratio climbed higher from late 2011 to early 2016. This wreaked havoc on Gold prices. Since peaking in early 2016, the ratio has formed a broad declining channel (pink shaded area). Each swing lower has provided a tailwind for Gold prices, while each counter-swing higher has been a headwind.

in ...



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Insider Scoop

Macy's Receives Mixed Analyst Reaction After Q3 Earnings Beat, Sales Miss

Courtesy of Benzinga.

Related M Big Box Bonanza: Walmart Beats Most Estimates, But Brexit Could Steal Attention Mid-A...

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Members' Corner

NY Times: OPERATION INFEKTION

 

This is a three-part Opinion Video Series from NY Times about Russia’s meddling in the United States’ elections as part of its "decades-long campaign to tear the West apart." This is not fake news. Read more about the series here.

OPERATION INFEKTION

RUSSIAN DISINFORMATION: FROM COLD WAR TO KANYE

By Adam B. Ellick and Adam Westbrook

EPISODE 1

MEE...



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Chart School

Weekly Market Recap Nov 11, 2018

Courtesy of Blain.

This past week was saw another positive move up by bulls – especially in the Dow and S&P 500; the NASDAQ was not quite as enthusiastic.   Wednesday’s rally was on the legs of an election that was seen as market friendly or at least not as bad as it could have been.   Essentially – paying people a lot of money to get nothing done the next 2 years – woo hoo!

The market is interpreting Wedneday’s result as insuring that “no big things will get done,” in Washington between now and 2020, Craig Birk, chief investment officer at Personal Capital told MarketWatch. “The market appreciates the relative certainty of the slow legislative agenda.” he said.

“As President Trump plans his 2020 reelection campaign, a gridlocked Congress is unlik...



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Digital Currencies

Bitcoin's high energy consumption is a concern - but it may be a price worth paying

 

Bitcoin's high energy consumption is a concern – but it may be a price worth paying

Shutterstock

Courtesy of Steven Huckle, University of Sussex

Bitcoin recently turned ten years old. In that time, it has proved revolutionary because it ignores the need for modern money’s institutions to verify payments. Instead, Bitcoin relies on cryptographic techniques to prove identity and authenticity.

However, the price to pay for all of this innovation is a high carbon footprint, created by Bitc...



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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

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

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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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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All About Trends

Mid-Day Update

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

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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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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