Phil's Newsletter

Just Another Manic Monday – S&P 2,728 – Again…

Wow, what a "rally".  

Half of Europe is closed and the Dow Futures (/YM) are up 225 points – back to 25,000 (again) and the S&P (/ES) are right back at good old 2,728 (our 20% line) with 6,925 on the Nasdaq (/NQ), again and 1,632.50 on the Russell (/TF) – so same old, same old and happy Monday.  The reason we're up is because China's $500M bribe for President Trump did the trick and suddenly we're rolling over on trade.  I'm glad – trade wars are terrible for the economy and we should give Trump credit if the whole thing was just a ruse to line his own pockets and not just the mindless pursuit of an iditotic policy that was doomed to fail…

Speaking of idiotic policies – we have the FOMC Minutes this Wednesday and 10 Fed Speakers into the 3-day Holiday Weekend (US markets closed next Monday).  I used to run down who was a hawk and who was a dove but they all sound like doves since Powell took over and we'll see if the minutes to the last meeting indicate the Fed is still on track to raise rates 3 times with only 5 meetings left this year. 

As earnings season begins to wind down, we're seeing analysts projecting that the 20% pop in earnings caused by the Trump Tax Cuts for Corporations will somehow happen again next year (it is certainly possible that, if the GOP keeps the House and Senate, they may pass another round of cuts for the Top 1% – crazy as that may seem).  Edward Yardeni of Yardeni research asks "What are Stock Industry Analysts Smoking" and his own 2019 estimates are $166/S&P share, about 5% below consensus.

Of course, all this is assuming nothing goes wrong and the President won't be impeached and we amicably resolve all our differences on Trade with China, Japan, Europe, Mexico and Canada and we peacefully disarm Iran and North Korea and prove Global Warming isn't a problem so Hawaii won't melt and neither will the ice caps and glaciers and Russia won't meddle in the November election (because we haven't done anying about their…
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Philstockworld May Portfolio Review (Members Only)

Image result for one million dollars animated gif$773,776! 

That's up $173,776 (28.9%) in our paired Long-Term and Short-Term Portfolios.  30% is a healthy goal for an entire year (and Berkshire Hathaway averages 16.3% per year) so I really, Really, REALLY would love to cash out at this point and take the summer off.  As I have said for the past two weeks, if it wasn't my job to teach people how to trade – including running portfolios during downturns – I would absolutely be cashing out and, to that point, both of my kids' college accounts are in CASH!!! and our Hedge Fund is 90% CASH!!! at the moment so, yes, that is what I would do with my own accounts!  

As long as the indexes are holding above their 50-day moving averages, we're not in immediate danger so, with what we're playing, I'm not going to hedge too heavily either – unless we get signs of a deeper breakdown.  This market seems to bounce back from everything but so did the market in 2007 – until it finally didn't.  It sure would have been nice to be sitting on the sidelines with 128.9% of your money back then, right!

As it stands, our Long-Term Portfolio has 62% of it's cash on the sideline while the STP has 90% on the sideline so we've got plenty to deploy in a downturn.  We just finished our reviews and, in the LTP, there was only one adjustment to make so we like all of our positions and are happy to add more to them if they get cheaper and there were no adjustments to make to the STP, so we're happy with our hedges as well…

Also, these are new portfolios, started Jan 2nd this year as we decided to cash in after our November Portfolio Review last year but we did follow through with my plan, which is why we're doing so well after just 4.5 months of trading in the new portfolios:

Really, I am sorry I've been so cautious but I could not, in good conscience, risk those spectacular gains into Q3 earnings and the Holidays.  We have a lot of open positions and they'd be difficult


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TGIF – A Weak Week in the Markets Drifts to a Close

Same old, same old…

We're at the same levels we were at on Tuesday (a bit weaker), when we extensively went over the technicals, so we're not going to do that again.  As you can see on the S&P chart, our short at 2,728 on the S&P Futures (/ES) is still holding up and we see no reason to change it today or over the weekend.  Similarly, our big shorting hedge on the Nasdaq (/NQ) is still up $2,000 per contract (from 7,000) at 6,900 and our predicted bottom is a $10,000 per contract gain at 6,500 if "sell in May" becomes a thing around the holiday weekend.

We primarily use the Futures for hedges as we are generally bullish in our 5 Member Portfolios and that means we like to have a little extra protection – especially when the broad market is shut down and we can't make any adjustments.  We're very happy with the portfolio performance so far this year and, in fact, we're too happy so, as we've been discussing in our recent Morning Reports as well as our weekly Live Trading Webinars, I think it would be far wiser to go to CASH!!! into the summer and we'll see if July earnings make us want to buy again.

We're not officially doing that because PSW is a teaching site so we teach people how to manage portfolios in good markets and bad but CASH!!! is a very valid strategy and allows you to take a nice vacation and have a life – those are good things!  Personally, our Hedge Fund is over 90% in cash and my kids' college accounts are 100% in cash into the summer – but you can play the market any way you want!  

One portfolio that we make available to the general public is our Money Talk Portfolio, where every trade idea is announced live on the show and we make no adjustments other than on those appearances.  I haven't been on since Feb 1st but, even so, the trade ideas in this ultra low-touch portfolio are already up 73.4% since September – not bad for 8 months and only a few adjustments.  

 

Being well-balanced is the key
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Thursday Thrust – Russell Small Cap Index Rockets Away from Reality

WTF?

The Russell 2,000 Index is often disconnected from the other indexes but lately it's become disconnected from the economic data, which has turned substantially lower in Q2 while the index has rocketed from 1,500 on April 1st to 1,620 yesterday – not quite 10% in not quite 2 months.

As you can see from Zero Hedge's chart, this is the widest disconnect between the Russell and the Economic Surprise Index (data better or worse than expected) since last October, when the Russell topped out at 1,520 and then corrected 50 points to 1,470 but it only stopped when the Data turned more positive.  What's propelling the Russell to unreality this week is the suddenly strong Dollar, which is great for small cap companies who do the vast majority of their business locally, in US Dollars.  

But the Dollar can't keep up this pace and, in fact, just yesterday, the Hong Kong Monetary Authority stepped in to put a floor on their currency's slide and we can expect the PBOC and other Central Banks to follow as the Dollar hits the 5% Rule™ at  93.45.

Given the 4.45 run from 89, we can expect a weak retrace of 20% of that run (0.89) so call it 0.9 and that takes us back to 92.55 and a stronger retrace would be 91.65 – so that's what we'll look for to see if the Central Bank Interventions are enough to stop people from running to the relative safety of the Dollar while the World is in turmoil (see yesteday's Morning Report).  

Speaking of turmoil, team Putin Trump are hard at work destroying America's credibility around the World, first making demands that caused Kim Jong Un to re-think making a deal on nukes and then Treasury Secretary Steve Mnuchin and White Hose Economic Adviser Peter Navaro end up cursing each other out at the China Trade Talks with Mnuchin holding side meetings with Chinese officials that Navaro was not invited to.  Just imagine negotiating with guys who act like that!  

Image result for trump putin puppet gifMeanwhile, Japan is fed up with us and is planning retaliatory trade strikes on the US while simulataneously
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Weakening Wednesday – Global Markets Retreat as Tensions Ratchet Higher

I told you I like CASH!!!

In fact, I told you on Friday morning in our Report titled:  "TGIF – Silly, Low-Volume, Pumped-Up Week Finally Ends", saying:

"Volume has been anemic this week too with, 55M SPY shares trading on Monday, 67M shares on Tuesday, 59M shares on Weds and 68M shares yesterday vs an average volume of 101M shares so about 35% below "normal" volume, which is already close to half of last year's volume.  Why is volume drying up like this?  Because stocks are more expensive so the same money buys less and less stock and, because the economy isn't really growing – there is no more money to pay for the stocks – just a lot of idiots SPECULATING that there will be money to pay these ridiculous prices one day, so it's not important to actually earn any money because the greater fool theory will fix everything. 

"The greatest fools, of course, are the last people to buy at the top – we call them bag-holders and I have been saying all week that this test of our Strong Bounce Lines is a good time to dump your stocks on the bagholders that are coming in and get back to CASH!!!.  Again, I can only tell you what is likely to happen and how to make money trading it – the rest is up to you!"  

So far this week, the markets are down and the Dollar is up 1.5% and still cimbing this morning at 93.50, that's putting pressure on the indexes and commodities which makes people panic out of those and they then demand more CASH!!!, which drives up the price of Dollars (as they get scarce) and the cycle continues.  People are also trying to trade in their dying TBills for cash – so even more demand for cash.  Thank goodness housing is still dead or the Dollar would be back over 100!  

Image result for cash animated gifWe're thrilled to have a nice little pullback and we even bought a couple of stocks yesterday but, on the whole, we're even more thrilled to be mainly in CASH!!! during this period of market uncertainty.  You
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Technical Tuesday – Trouble at 2,728, Again!

The market is so predictable.  

There's a ton of money to be made from predictable, so we're certainly not complaining.  After a meaningless spike higher, the S&P calmed right down and finished right at our 2,782 line (2,730, actually) and this morning, as expected, the index is pulling back as the Dollar rises back to the top of it's range.  Eventually, one of these will break out and the other will fall – but which one will prevail?

We had a good run on /ES, all the way from 2,600 (barely touched two weeks ago) back to 2,728 and a 28-point run means we're looking for a 5.6-point retrace back to 2,723 (weak) and 2,717 (strong) and, even as I write this (7:30), the Futures bounced off 2,723, failed 2,728 again and are now testing 2,723 again but I think they'll fail as the Dollar is at 92.87 and rising and that's up half a point so we'll look for 2,717 and see how that's doing.  The Futures on the S&P (/ES) pay $50 per point so it's a quick $300 if that bet plays out and, of course, simply stop out over 2,723 to limit the risk.

The Dow is also having fun around it's own 20% line but, in this case, it's been unable to get over the line (25,200).  26,250 is the 25% line and that's 1,050 away but we'll call it 1,000 so we can call the bounce lines 200 points and that makes our up and down range from 25,200: 24,800, 25,000, 25,400 and 25,600 so we can chart that like this:

The Dow strayed down to the 200 dma at 23,750 so the run to 24,950 yesterday was 1,200 points and we'll call those rejection lines 250 points to 24,700 (weak) and 24,450 (strong) but that would take us back below the 20% line and that would be a big negative so very bad if 24,700 does not hold.  

Exxon (XOM) and Chevron (CVX) have been boosting the Dow as oil and gasoline test new highs but what's great for them is not so good for the industrials that use oil and gas to produce goods but, fortunately, there are not too many
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Just Another Manic Monday

Palestinian protesters run for cover from tear gas during clashes with Israeli forces near the border between the Gaza strip and Israel.28 protesters were killed in Israel and 1,000 wounded this morning (so far).

Jared and Ivanka were on-hand for the opening of the new US Embassy in Jerusalem and, to no rational person's surprise, things did not go well and now tensions are escalating and Hamas claims they will have 100,000 people ready to storm the fence between those two countries – this is, of course, the kind of tension Trump wants to bring to this country along our Mexican border.

In more anti-American news, Iraqis voted for populist cleric Maqtada al-Sadr, who openly fought against US forces and has allied himself with the Communist Party but he ran on the Trumpian platform of "draining the swamp", which plays just as well with ignorant Iraquis as it does with ignorant Americans.  This election puts al-Sadr on track to possibly become the next Prime Minister, which would be a tremendous blow that undoes all the progress the US has made in Iraq since the Bush years – yet another Obama policy Trump is completely reversing!

This has sent the price of oil (/CL) and gasoline (/RB) spiking higher this morning but not before we got a nice dip in /RB back to $2.17, an $840 per contract gain from our short at $2.19 on Friday.  

Speaking of reversing:  Trump announced this morning that he will be lifting the ban on China's ZTE Corp, which had been accused of "egregious behavior" in evading sanctions the US has placed on other countries as well as having phones that were a Trojan Horse for Chinese spyware.  Trump said in a Sunday morning tweet that he and Chinese leader Xi Jinping are working together to give ZTE “a way to get back into business, fast.’’  The U.S. blockade has choked off the revenue of the No. 2 Chinese telecom company, which regards the next two weeks as crucial as it faces potential collapse. 

Trump’s comments about the company and concern about Chinese jobs come as the U.S. and China are locked in high-stakes negotiations over trade and intellectual property.  Both countries are threatening to slap tariffs
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TGIF – Silly, Low-Volume, Pumped-Up Week Finally Ends

What a week it has been! 

The S&P 500 has blasted off our 20% line (that's 20% above fair value, by the way) to the 23.33% line at 2,728 and that's what we call a strong bounce from the fall we endured way back in late Jan/early Feb and doesn't actually mean a thing until we're over it.  Otherwise, it's just a the top of the same trading range we've been in all year.  

This morning we have the Fed's Bullard speaking at 8:30, who used to be reliably hawkish but turned doveish last year – so anything can happen when he gives a speech this morning at his local Business Development Corporation (Springfield, MO) on "US Monetary and Economic Policy."  People tend to get a bit more real when talking to their hometown crowd – like the time Trump boasted that he "could stand in the middle of 5th Avenue and shoot somebody and I wouldn't lose votes" to illustrate how blindly loyal his base was.  

In our Live Member Chat Room (my "hometown" audience), I called for shorting the S&P (/ES) at 2,725 this morning as well as the Nasdaq.  Here it is in context.  

Markets holding on to yesterday's gains so far.   All about that strong bounce line.  

Bullard speaking at 8:30 so we'll see what he has to say and then Consumer Sentiment probably decreasing a bit at 10, but nothing likely to move the market other than Trump's Drug speech later and that's bound to spook that sector so I'd short /ES here (2,725) as we know they have trouble at 2,728 so $150 loss limit but very likely to give us a little run lower (though maybe wait until Bullard to be sure).  


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Trilling Thursday – Moving Back to the High End of the Range?

I don't want to get to excited but:

As we did on April 10th, we're poking back over the weak bounce line on the S&P after a huge and silly rally that completely ignored what was actually going on both globally and locally.  That spike lasted 3 days, less than March's 5-day spike over the strong bounce line but tied with February's spike over the strong line while January spent almost the whole month over the strong line before setting the year's lows (and the strong retrace) within 10 days.  

As we expected, yesterday was a fantastic day to cash out as there were buyers for our overpriced stocks all day long.  Have a good vacation smart people who took my advice!  We're expecting to top out at 2,720 (April's high) on /ES and then we'll try a short again but, as we did in yesterday's Live Trading Webinar (replay available here), we're still shorting the Russell (/RTY) below the 1,600 line (tight stops above) and /ES if they fail 2,700 – because we'd hate to miss that fun.  Dow (/YM) below 24,500 and Nasdaq (/NQ) below 6,900 would confirm weakness. 

For the rest of you, let's smash our heads in with those copper cups they serve Moscow Mules in (after drinking it, of course!) so we can get in the right frame of mind to pretend this BS market is worth talking about.  Ah, I remember Club Maximus in New City, NY when Monday's were Kamikaze Night and they played New Wave Music and served 3 shots for $1.   A Moscow Mule is really a Kamikaze but somehow they decided Kamikaze was insensitive or something.  Anway, back then you could get in if you LOOKED 18 so I was drinking there since I was 15, in 1978 and we'd drop $5 on the bar and the bartender would line up 15 shot glass and fill them all up, spilling plenty on the bar as well – ah, good times!  Then we'd dance to these songs:

No automatic alt text available.

No automatic alt text available.Having 15 drinks in front of
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Whipsaw Wednesday – S&P 2,684 (again) Gives us Another Shorting Opportunity

Are we stuck in a loop?

This morning, despite President Trump moving the Doomsday Clock up another minute by unilaterally (which means without the agreement of ANYONE else who participated) withdrawing from the Iran Nuclear Treaty, which was put together after years of diplomacy with a dozen countries – including China.  Now the World has to decide who they are going to side with – Iran, who, despite Israel's claims to the contrary, have been adhering to the agreement or Trump, who's a friggin' lunatic.  

Unfortunately, the lunatic already has A LOT of nuclear weapons and he's already stated he's not afraid to use them, so people don't want to be on his bad side.  If anything, Trump's action justify Kim Jong Un's strategy of first building the weapons and THEN negotiating – as the non-nuclear Iran has become Trump's whipping boy while Trump is arranging to meet with Kim, a consideration he has not given to Iran.

Image result for trump iran nuclear cartoonFormer President Barack Obama, who rarely comments on his successor, issued a statement describing Trump's move as a "serious mistake" that could leave the US with a "losing choice between a nuclear-armed Iran or another war in the Middle East."

Some of the US' closest allies, the UK, France and Germany, issued a statement expressing "regret and concern" about the decision, emphasizing Iran's compliance with the deal and their "continuing commitment" to the Joint Commission Plan of Action, as the deal is formally known.  Iran's President, Hassan Rouhani, said he had ordered the country's atomic industry to be ready to restart industrial uranium enrichment, while the country's foreign minister said he would work with the pact's remaining partners — France, the UK, Germany, China and Russia — to see whether they could ensure "full benefits for Iran. Outcome will determine our response," Javad Zarif tweeted.

It is mission accomplised for Trump's Big Oil Donors as oil (/CL) is back over $70 and gasoline (/RB) is over $2.15 wholesale ($3 retail) – just in time for summer driving season,…
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Chart School

Narrow Trading Ranges Set Up New Breakout Opportunities

Courtesy of Declan.

The past few days have seen markets shape narrow mini-trading ranges, each following breakouts from larger consolidations. Large Caps show this best

The S&P cleared a dual 4-month and 6-week consolidation before shaping the past 8-day 'flag'. Look for a break of 2,740 and a push to challenge the next swing high at 2,800 - although a test of this should be enough to go on and challenge all-time highs.


The Dow Jones Index could be considered to have broken from its mini-consolidation. Volume was...

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Phil's Favorites

Impeachment Fantasies

 

Impeachment Fantasies

Courtesy of 

The stock market seems to have gotten very good at ignoring the coming constitutional crisis. It may one day start to care again but I think it’s fairly clear that at this point, it cares not at all. I think the market is smarter than many pundits give it credit for.

New all-time highs in the Russell 2000 small cap index this week make it clear that investors expect consumers and businesses to go on with their lives regardless of what happens in Washington D.C. – and that they’ll continue to benefit from the improved economy and drastically lower tax environment.

The Mue...



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Zero Hedge

Elon Musk's Great Model 3 Bait and Switch

Courtesy of ZeroHedge. View original post here.

The Tesla Model 3 was supposed to be the "entry-level" electric vehicle for the middle class, that "made it up in volume": leading up to the release of the Model 3, it was positioned as the people's EV that everybody could afford and that, once mass produced, would help Tesla generate cash and profits consistently. The car's relatively modest $35,000 price tag was heralded as one of its key selling points, low enough that Tesla could generate the volume needed to gain operating leverage from selling it to the masses. 

But as Elon Musk himself admitted this weekend on Twitte...



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Biotech

Could this be the year for a Canadian Breakthrough Prize in Life Sciences?

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

 

Could this be the year for a Canadian Breakthrough Prize in Life Sciences?

Courtesy of John Bergeron, McGill University

In 2013, Kyoto University’s Shinya Yamanaka was awarded one of the first Breakthrough Prizes in Life Sciences for his discovery of “induced” stem cells that enabled researchers to convert adult cells back into stem cells.

The Breakthrough Prize is not to be sneezed at. Founded in 2013, the prize “honours transformative advances toward understanding living systems and extending human life.” It’s also the most financially attractive aw...



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Insider Scoop

8 Stocks Moving In Monday's After-Hours Session

Courtesy of Benzinga.

Related PTX Benzinga's Daily Biotech Pulse: FDA Panel Nod For Akcea, Synergy's Revenue Miss, FDA Warns E-Liquid Makers Again 18 Stocks Moving In Friday's Pre-Market Session Related 36 Biggest Movers From Friday ...

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Digital Currencies

5 Factors That Drive Bitcoin's Ups & Downs

Courtesy of ZeroHedge. View original post here.

By Kayla Matthews via Hackernoon.com

The price of Bitcoin has been wildly volatile. From November to December 2017, it increased by 223 percent. It fell by 59 percent between January and February 2018, increased by 64 percent from February to March and then dropped again during March by 40 percent.

While this isn&r...



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ValueWalk

Buffett At His Best

By csinvesting. Originally published at ValueWalk.

Bear with me as I share a bit of my history that helped me create SkyVu and the Battle Bears games. The University of Nebraska gave me my first job after college. I mostly pushed TV carts around, edited videos for professors or the occasional speaker event. One day, Warren Buffet came to campus to speak to the College of Business. I didn’t think much of this speech at the time but I saved it for some reason. 15 years later, as a founder of my own company, I watch and listen to this particular speech every year to remind myself of the fundamentals and values Mr. Buffett looks for. He’s addressing business students at his alma mater, so I think his style here is a bit more ‘close to home’ than in his other speeches. Hopefully many of you find great value in this video like I have. Sorry for the VHS...



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Kimble Charting Solutions

The Stock Bull Market Stops Here!

 

The Stock Bull Market Stops Here!

Courtesy of Kimble Charting

 

The definition of a bull market or bull trends widely vary. One of the more common criteria for bull markets is determined by the asset being above or below its 200 day moving average.

In my humble opinion, each index above remains in a bull trend, as triple support (200-day moving averages, 2-year rising support lines, and February lows) are still in play ...



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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)

 

"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...



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Mapping The Market

The tricks propagandists use to beat science

Via Jean-Luc

How propagandist beat science – they did it for the tobacco industry and now it's in favor of the energy companies:

The tricks propagandists use to beat science

The original tobacco strategy involved several lines of attack. One of these was to fund research that supported the industry and then publish only the results that fit the required narrative. “For instance, in 1954 the TIRC distributed a pamphlet entitled ‘A Scientific Perspective on the Cigarette Controversy’ to nearly 200,000 doctors, journalists, and policy-makers, in which they emphasized favorable research and questioned results supporting the contrary view,” say Weatherall and co, who call this approach biased production.

A second approach promoted independent research that happened to support ...



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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

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



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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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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 >>