Phil's Newsletter

Will We Hold It Wednesday – S&P 3,000 Edition

So far, so good.

Just a few days into earnings season but no major blow-ups yet and the S&P 500 is holding up over the 3,000 line but the volume finally increased yesterday and it was down volume, not up.  We have to hold 3,000 for the whole weak to make a meaningful breakout and this evening we get earnings from a lot of heavy-weights like EBAY, NFLX and IBM and MSFT reports tomorrow evening so we'll have some clues as to how Big Tech is doing.  

Bank earnings have been good so far and Dow components JPM, GS and even JNJ beat their estimates yesterday though the overall index still finished lower as sellers showed up and found not enough buyers to keep the prices level.  That's the great danger in a low-volume rally:  When it comes time to sell, there's no one to buy it from you and prices can drop very quickly.

We're in a very strange market at the moment where earnings are clearly coming down but the market just keeps going up.  There's a huge disconnect from reality and, as I've said before, Fear of Missing Out (FOMO) is keeping people in but this market can turn ugly very quickly and it's VERY important to have hedges in your portfolios and, keep in mind, CASH!!! is the best hedge there is.

We'll be reviewing our Short-Term Portfolio (STP) this morning (and in our Live Trading Webinar at 1pm, EST) and making sure those hedges are enough to protect our Long-Term Portfolio (LTP) and, if not, then either we need more hedges or less positions!  

Our Money Talk Portfolio has its own hedges and we last reviewed that over at Seeking Alpha on May 16th at $112,908 and, since we only adjust this portfolio live on BNN's Money Talk show and since I haven't been on since (will be on in August), the positions remain untouched but on track as we're now up to $135,583, so it's been a very good two months with a $22,675 gain, which is 45% of our $50,000 base!  SQQQ calls expired worthless and TZA had a reverse split but nothing else has changed but the rally has given us a huge chunk
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320% Tuesday – Global Debt to GDP Makes New Records

      $246,000,000,000,000.

That's what we just hit in Global Debt as of Q1 and, as you can easily see by adding up all the numbers in the chart on the right, our Global GDP is just under $80Tn so we're now hitting the 320% mark on the debt to GDP scale for the first time in human history.  And the US "only" has $22.5Tn of that debt so perhaps you are willing to ignore the complete inability of the US to ever pay that bill, but that still leaves $223,500,000,000,000 of debt divided by the remaining $60Tn, which means the rest of the world is getting very close to being 400% of their GDP in debt.

And what is the rest of the World doing about it?  The same thing we are – they are easing their policies and they are spending money on stimulus programs because NO ONE can afford a recession – even a mild one can quickly lead to a total collapse that will ignite this global debt bomb – and no one wants to see that happen so we are Globally "extending and pretending" and waiting for the debt fairy to come and forgive us our economic sins.  

While the Chinese Government is "only" about 100% of their GDP in debt, Chinese Companies make up for it with their own $21Tn pile of debt, 155% of their current GDP.  In fact, Chinese firms accounted for 42% of all Corporate Bonds issued in Emerging Markets this year and the IIF says there are now serious risks of default next year and in 2021.  Sonja Gibbs the IIF’s Managing Director for Global Policy Initiatives, said:

"It’s almost Pavlovian. Rates go down and borrowing goes up. Once they are built up, debts are hard to pay down without diverting funds from other goals, whether that’s productive investment by companies or government spending.”  

This is not a group of borrowers with long experience of managing debt over economic cycles. Once you get into a downturn, a lot of firms have a lot of debts that they will have difficulty in paying.”

There's been a shift to shorter-term borrowing in Emerging Markets as the yield curve widens and that leaves
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Monday Market Momentum Continues

And we keep going higher!

The S&P is now up 15% for the year and 25% off the December lows and 10% off the June lows, so it's been quite a year for the senior index.  Citigroup (C) kicked off earnings season this morning with a decent report but tomorrow things begin to get serious and it will be a jam-packed couple of weeks as July 4th cost us a week so we're a bit behind in our reporting already.  

Income at C is up 7% from last year at $4.5Bn for the quarter, which is $1.95/share vs $1.85 expected but revenues were only in-line at $18.5Bn so we're not likely to get a very enthusiastic reaction with the stock already at $72 (we are long C with a 2021 target of $75 in our LTP).  There aren't many bank stocks we like but C is one of them so no surprise here.  Wells Fargo (WFC) tomorrow will be much more interesing and Johnson & Johnson (JNJ) also reports in the morning and we'll see what they set aside for their talcum powder scandal.  

These are probably the most fun earnings to play but it's early in the season and we have little to go on though we are already long on Skechers (SKX) and Cliffs (CLF) though SKX passed our $27 target long agao and we're just waiting to get paid as the spread is netting just $11,025 out of a potential $16,000 so it still has $4,975 (45%) left to gain between now and Jan 17th, 2020 even though it's +20% in the money – aren't options fun?

SKX Short Put 2020 17-JAN 30.00 PUT [SKX @ $34.11 $0.00] -10


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Fabulous Friday – No Worries Into the Weekend?

Image result for s&p 3000 hats2,999.91!  

That's where the S&P 500 closed yesterday and, this morning, they've pumped it up to 3,010 because "THEY" didn't do all this work just to fall short of S&P 3,000.  After all, they already made the hats…  They were wearing Dow 14,000 hats back in July of 2007 – those were replaced by Dow 8,000 hats a year later so let's not get too excited by the fashion accessories worn by the MSM cheerleaders.  

On Monday, Japan is supposed to start restricting key electronic components from being shipped to South Korea and this may become the most damaging battle in the Global Trade War so far as it will screw up a large amount of electronics manufacturing world-wide and the stuff they are making now is what's supposed to be going on the shelves for Christmas – so the repercussions could flow out far and wide.  SoKo's Samsung and SK Hynix are the World's two largest chip-makers – key suppliers to Apple and dozens of other companies.  

Even worse is that this is a preview of the kind of pressure China can exert on the United States by restricting the trade in Rare Earth materials – something we were worried about a month ago but people seem to have already forgotten all about.  Though trade talks resume next week, China has put together a new trade team packed with hard-liners and Larry Kudlow stated that there is no timeline for an agreement and "He also hoped that China would not seek to "wait out" the Trump administration."  So the White House is concerned that this could drag on for 18 more months!

Trade discussusions collapsed in May and now it's July and we're only just getting back to the table.  China has flatly stated they won't capitulate to Trump's demands and threatened to take action using Rare Earth Exports and, unlike Trump, China is not knows for making empty threats while posturing for their base.  Trump, meanwhile, is still threatening to add another $300Bn worth of tariffs if China doesn't play ball with him.

As you can see from the graphic (which is already eclipsed), the indexes are up about 10% since the tariffs
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S&P 3,000 Thursday – Markets Up 350% from March 2009 Lows!

350%! 

That's 3.5 times more than the S&P 500 was valued at just 10 years ago.  That would imply economic growth of 35% a year for the past 10 years so kudos to all the believers although, to be fair, we thought the market was toppy at 2,850 last year and we're really only up 150 (5%) since then so let's not get too excited that we're finally  hitting 3,000 after trying for 18 months

All the heavy lifting, from 666 to 2,500 (275%) was done under Obama's watch and the economy was doing so well that the Fed was tightening and reducting their balance sheet.  30 months into Trump's turn in office and the Fed is hitting the panic button again, reversing course and actually going back to cutting rates to help stabilize an economy ravaged by rampaging deficits, political instability and pointless trade wars.  

And that's considered the "GOOD" news that traders are embracing from Powell's comments as he stretches to justify bowing to pressure from the President to lower rates despite all the prosperity the President claims we are enjoying.  Of course it makes no sense – but is that a reason not to pay all-time high prices for stocks?  $1Tn for Apple (AAPL), $1Tn for Microsoft (MSFT), $1Tn for Amazon (AMZN)… sure, why not?  After all, what's a Trillion anyway – we run up more than that in debt every 12 months now.  

We're on a path towards making money meaningless so why not spend it on over-priced equities?  As you can see from the chart above, it's been a pretty much straight up 10-year run with only 6 noticeable corrections so once every 18 months we average a pullback on our 350% run.  No wonder so many people are trained to buy any dip – it's been a winning formula since Generation Y got out of college – they don't know any better.  

Ignorance can truly be bliss in a bull market as traders are content to ride stocks like Amazon to the moon while more cautious investors might have taken some off the table half a Trillion Dollars ago.  Just yesterday, AMZN gained 1.5% or $15Bn in market cap despite the fact that
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The Hemp Boca Portfolio

Related imageA new portfolio!

One of our PSW Investment Companies, Hemp Boca, sells CBD products and has a weekly radio show that I'm often a guest on and I've been giving trade ideas to their listeners and we have now begun to track them in a new virtual portfolio that we started with $50,000 and we're playing this one small and conservative – so it is a great way for people to get started learning to manage a small options portfolio.

We initiated the portfolio on May 21st so just over a month and we're only up 1.1% so far – so these are still good for new trades and we will add to the portfolio over the course of the year with a goal of making 25-30% annual returns.  Initially, there's always a bit of a loss when you add new positions as you are penalized by the bid/ask spreads of the options since your broker always shows you the worst-case balance.

So far, we've deployed just $6,895 of our cash and about 1/3 of our ordinary margin.  As this is our first summary of the positions, I will make some comments on each one as to the logic of the position and we will use these reviews for reference (as you always should with portfolios) to remind ourselves if our premises are holding up and whether or not our investments are on track to our goals at time progresses.

For those of you unfamiliar with options – it's really not very complicated.   

  • A call is a contract you buy (or sell) that gives the the right to purchase a stock at a certain price between now and the expiration date for that contract.  In the case below, we paid $4.20 for the right to buy IMAX stock for $17 between now and Jan 17th, 2020 – the expiration day for that contract.  Our bet then, is that IMAX will be higher than $21.20 (our net cost) on that date.  HOWEVER, we mitigated that cost by selling an equal number (10) of call contracts where someone paid us $1.78 for the right to buy IMAX stock for $21 between now and Jan 17th, 2020.  That lowers our net basis on the spread to $2.42 and


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Which Way Wednesday – Waiting on the Fed (Again)

TODAY is the day!  

I blame Econoday, which had Powell speaking yesterday on Monday's Economic Calendar but it turned out he is speaking today and tomorrow to Congress so the market just drifted along for the most part – continuing the boring trend for the month as we attempt to get over the 3,000 line on the S&P 500 (/ES).  

We did the math for the 5% Rule™ in yesterday's Live Member Chat Room and decided that 2,976 would be the inflection point and we closed a bit over the line yesterday but we're right back on the line this morning.

Powell's testimony begins at 10am and goes on for a couple of hours but his official statement being released at 8:30 so we'll see a quick reaction (not necessarily the right one) ahead of the bell.  Oil and Gasoline are up 2% off a strong API Report and the EIA Report confirms or denies those numbers at 10:30 – so that's another market-mover to watch this morning AND we have the Atlanta Fed's Business Expectations Report, also at 10 am and, just in case Powell doesn't get us over 3,000, Bullard has a speech lined up at 1:30 – just ahead of the Fed minutes.

8:30 update:  So much for waiting for Powell as his statement has popped the Dow 100 points already and here are the key points from his statement:

  • Since June, uncertainty continues to weigh on the outlook
  • Inflation pressures remain muted
  • Uncertainty over trade, global growth
  • Business investment slowed ‘notably’
  • Brexit, debt ceiling are unresolved
  • ‘Crosscurrents have reemerged’
  • Fed will ‘act as appropriate’ to sustain expansion
  • Baseline is still solid economic growth
  • Economy performing ‘reasonably well’
  • Inflation to move back over time to 2% objective

Traders are keying off "Fed will act as appropriate to sustain expansion" which indicates they are 100% behind this rally but it's a bit of cherry-picking as Powell is also saying we are on track to hit the inflation target (so easing makes no sense) and the "worries" he has for the economy are still Trade and Brexit (and their effect on
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Tuesday Testification – Powell Speaks to Congress

Image result for trump fedTo ease or not to ease

That is the question investors will be looking for Fed Chairman Powell to address when he testifies at 10 a.m. Wednesday before the House Financial Services committee and the next day to the Senate banking panel. Friday's strong jobs report has led to a sell-off as investors now believe the Fed is less likely to cut rates at their end-of-month meeting and of course they shouldn't be cutting with record-low unemployment, rising inflation and a record-high stock market – that would be MADNESS!!!  

Of course madness is Trump's sweet spot and he's been hammering on the Fed lately to lower rates because Trump needs to stretch this rally out another year or there's no way he'll get re-elected and he's going to need the Fed's cooperation because this rally has already overstayed it's welcome and is quite overdue for a correction.  The Fed, for it's part, wants to RAISE rates so they are then able to LOWER them WHEN it is necessary. If they lower rates when it's not necessary, what are they going to do when it is?  

Image result for trump baby balloonThat's the difference between thinking like a child and thinking like an adult, of course and, as our friends in the UK like to point out – Trump is essentially a giant baby with low attention span who likes to repeat catchy phrases with little understanding of the underlying issues and has an absolute melt-down if he doesn't immediately get what he wants.

Powell, like any Fed Chairman, is supposed to be the adult in the room and tries to intervene only when necessary – generally staying out of politics.  The need for an independent Federal Reserve has been recognized by every President in US History – until this one…  Even now, Trump is packing the Fed with his own people and is pressuring Powell to step down so he can put another sycophant in charge of our monetary policy – very scary stuff.  

Fortunately, the Fed doesn't answer to the President and they don't answer to Congress either but, twice a year, they are required to appear before Congress and explain themselves – though Alan Greenspan was great at making…
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Monday Market Movement – Morgan’s Misgivings

Morgan Stanley says we're in a Recession already.  

As you can see from this chart, the Treasury Yields are flashing signs we usually don't see until we are already deeply in a Recession only this time we're ignoring those signs, as well as dozens of other Economic Indicators that are screaming recession – to those who are willing to listen.  According to MS, "decelerations and disasppointments are mounting":

  • Cass Freight Index
  • Retailer earnings
  • Durable goods orders
  • Capital spending
  • PMIs
  • May payrolls
  • Semiconductor inventories


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Fallback Friday – Trump’s Parade Gets Rained On, S&P Teases 3,000

Wow are "THEY" trying hard to sell you this rally.  

The official close on the S&P 500 on Wednesday was 2,995.82 but they pushed and pushed once the volume went down at the close and hit 3,000 after hours but it all began to unwind at 3pm – as soon as the European Markets opened and the volume picked up.  That's a pretty strong indication that a lot of this "rally" is "fake, Fake, FAKE" but we can reserve judgment until 8:30, when we see the Non-Farm Payroll Report and the market's reaction to that.

As I noted on Tuesday, we're at the top (probably) of a 400-point run from 2,600 and, according to our fabulous 5% Rule™, we can expect a 20% pullback of this 15% move higher (2,990 actually) soi 400 points x 20% is 80 points back and since it's really 2,900 and since we like to round, we can say we expect to see 2,900 for a weak retrace of the run and somewhere between 2,800 and 2,840 (the real strong retrace from 3,000) should be a healthy pullback from here so that's the tendency we expect and now we'll see wha the data says.

8:30 Update:  Up 226,000 jobs!  That just blows away expectations of 160,000 and May was revised even lower, to 72,000 but this makes that look like an aberration and not a trend.  Unfortunately, Average Hourly Earnings are only up 0.2% so people have jobs but they aren't making any money.  You would think the markets would pop on that many jobs but no, too many jobs means the Fed is less likely to hike and their next meeting is July 31st, before the next jobs report – so this is what they'll be looking at and it would seem foolish for them to cut with these kinds of jobs numbers – where a HIKE is usually mandated.

  

"Fortunately" the jobs gains are mitigated by low wages so the Fed doesn't have pressure to raise rates but they would really have to twist themselves into knots in order to give Trump the cuts he wants and, of course, strong payrolls mean a strong demand for the Dollar and that's sending the Dollar up 0.5% which
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Phil's Favorites

US House condemns Donald Trump's racist tweets - why his language is so dangerous

 

US House condemns Donald Trump's racist tweets – why his language is so dangerous

Courtesy of Natasha Lindstaedt, University of Essex

President Donald Trump has been denounced by the US House of Representatives for tweets attacking four Democratic Congresswomen of colour calling on them to “go back and help fix the totally broken and crime infested places from which they came”. The resolution, which passed by 240 to 187 votes on July 16, condemned the “racist comments that have legitimised fear and hatred of New Americans and people of colour”.

In response to Trump’s threat, the four...



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Kimble Charting Solutions

Aussie Dollar About To Send Bullish Message To Precious Metals?

Courtesy of Chris Kimble.

The Australian Dollar and its ETF (NYSEARCA: FXA) have traded sideways for much of the past 4 years (see blue shaded area on chart above).

And since the Aussie Dollar and precious metals are highly correlated, this hasn’t helped gold and silver.

But this setup may be changing soon as a big test comes into play for the AU$.

It is currently testing falling resistance on a bullish falling wedge pattern.

If it succeeds in breaking out at (1), it will send metals and commodities a short-term bullish message. Stay tuned!

This article was first writ...



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Zero Hedge

Three Iranians Caught Smuggling "Many Tons" Of Nuke-Related Material Out Of US

Courtesy of ZeroHedge. View original post here.

A major case involving three Iranian citizens who for years allegedly smuggled nuclear related materials into Iran from a US broker has been revealed this week in a New York federal court. 

The scheme involved illegally exporting "many tons" of carbon fiber out of the United States between 2008 and 2013, which federal prosecutors say violated existing US sanctions and a UN em...



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Insider Scoop

Cannabis Stocks Gainers And Losers From July 17, 2019

Courtesy of Benzinga.

Read more about our latest Cannabis News! CANNABIS HOME Gainers
  • Aurora Cannabis (NYSE: ACB) shares rose 3.49%, to close at $7.41.
  • Aphria (NYSE: APHA) shares increased by 3.97% to close at $6.55.
  • Canopy...


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Digital Currencies

Bitcoin Breaks Back Below $10k, Crypto-Crash Accelerates As Asia Opens

Courtesy of ZeroHedge. View original post here.

Update 2010ET: Having briefly stabilized after this morning's weakness, cryptos are tumbling once again as Asian markets open.

Bitcoin has broken below $10,000 again...

*  *  *

While all eyes are on Bitcoin as it slides back towards $10,000, the real mover in the last 12 hours has been Ethereum after...



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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

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

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

...

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Chart School

Gold Gann Angle Update

Courtesy of Read the Ticker.

Charts show us the golden brick road to high prices.

GLD Gann Angle has been working since 2016. Higher prices are expected. Who would say anything different, and why and how?

Click for popup. Clear your browser cache if image is not showing.



The GLD very wide channel shows us the way.
- Conservative: Tag the 10 year rally starting in 2001 to 2019 and it forecasts $750 GLD (or $7500 USD Gold Futures) in 10 years.
- Aggressive: Tag the 5 year rally starting in 1976 to 2019  and it forecasts $750 GLD (or $7500 USD Gold Futures) in 5 years.

Click for popup. Clear your browser cache if ima...



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Members' Corner

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

Are you ready to retire?  

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

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

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



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

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

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



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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.

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