Phil's Newsletter

Thursday Thoughts – Powell Gives the Markets a lot to Digest

Image result for fed rate hikes 2018Wheeeee – such fun!  

As we expected, the Fed raised rates because they had to (because they didn't listen to me and raise rates at the November meeting, when it would have had less impact) and the market freaked out and plowed lower but we decided to remain bullish because all that really happened is SOME people decided to sell and, since we have a very low-volume market – some people is all it takes to jam the market much lower.  Once the rate-sensitive funds are done selling – the bargain-shoppers can step back in.  

And what bargains there are!  While I noted yesterday that the indexes are probably fairly valued as they are still propped up by the ridculous headline valuations of AMZN, TSLA, NFLX, any marijuana company…  there are now hundreds of companies trading at ridiculous discounts to their fair valuation including Apple (AAPL) who made $60 BILLION in the last 4 quarters and has $240Bn in CASH!!! (including long-term investments) yet you can buy the whole company for $760Bn at $160 so $760Bn – CASH!!! is $520Bn/$60Bn = a price/earnings ratio of 8.666.  That's pretty low!  

Of course there has been a lot of rumors that IPhones aren't selling well etc and maybe they are down a bit but I was just at a dinner yesterday with a lot of people and someone gave the waiter a phone to take a group picture with and the waiter didn't know how to use it because it wasn't an IPhone and about 8 people shouted at the same time to the guy who's phone it was "Get an IPhone, for God's sake!" and then we started talking about how Andriods suck and how annoying it is to try to send things to people with Androids, etc….  

Image result for iphone teens chart18 out of 22 people at dinner had IPhones and that's in a wealthy part of Florida but my ordinary town in NJ (middle to upper-middle class) is probably 80% IPhones as well.  Now, I'm sure it's different somewhere in America because, nationally, IOS (Apple's operating system) is only on 50% of the phones in the country but, as of April, 82% of the teens
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Which Way Wednesday – FOMC Edition

Image result for economy cliff cartoonWill the Fed save us or doom us? 

Forget the Fed, actually, let's talk about FedEx (FDX) and Micron (MU) both of whom are down 7.5% this morning as they are being shorted by the same algos and both of which are widely-held stocks that have their fingers on the pulse of the economy and both of which are warning us that the Global Economy is in arrest!  

Micron actually hit on earnings ($2.97 vs $2.95 expected) but missed on sales ($7.91Bn vs $8.01Bn expected) as tariffs have indeed weakened demand and the company warned that an escalation in tariffs from 10% to 25% would significantly impact them going forward.

FedEx, on the other hand, also beat on earnings ($4.03 vs $3.94 expected) and beat on revenues ($17.8Bn vs $17.69Bn expected) but issued a dire warning as they issued weak guidance and warned of the grim impact trade wars are having on the global economy, saying: "Global trade has slowed in recent months and leading indicators point to ongoing deceleration in global trade near-term."  Despite beating on both the top and bottom lines, shares fell after FedEx announced a cost-cutting initiative and lowered its full-year forecast on trade and tariff-related issues. The company now expects to earn between $15.50 and $16.50 per share in fiscal 2019, which is far below consensus estimates of $17.73 per share.

“While the U.S. economy remains solid, our international business weakened during the quarter, especially in Europe. We are taking action to mitigate the impact of this trend through new cost-reduction initiatives,” Frederick W. Smith, FedEx chairman and CEO said in a statement.

I just said yesterday morning that we should look for a lot of Corporate cost-cutting into 2019 that would indicate we are slowing down and usually it takes more than 24 hours for me to be proven right – but I'll take the "win", I guess…

Related imageI'm not happy about it, this means the damage is worse than expected already and the Fed really shouldn't be tightening this afternoon but they kind of have to tighten as rates are still
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Trumpless Tuesday – Small Cap Stocks Erase ALL the Gains of the Trump Error

A World without Trump!

That was the subject of the opening sketch on Saturday Night Live this weekend which, like "It's a Wonderful Life" showed Donald Trump how much better off the World would have been if only he had not been President.  The chart on the right shows that small caps (IWM) have already given up ALL of the Trump error gains and the other indexes are not too far behind.  As Trump (Baldwin) says in the sketch "It's terrible, everything is falling apart" and that's certainly true of the stock market, which isn't waiting for Trump to be handcuffed and forcibly removed from the White House to roll back the rally that's put the country $2.5Tn further into debt in just two years.  

Maybe the markets are worried about the debt, maybe they are worried about President Pelosi (Pence is looking like he'll be out as well) or the looming Government Shutdown or maybe the economy isn't quite as good as Team Trump has been claiming or maybe investors are finally realizing what I've been saying all year:  That earnings have been the result of a massive tax-cut sugar-high that cannot be repeated (and shouldn't have happened in the first place) and that there is no way that most companies will live up to the valuations that have been wrongfully extrapolated based on a one-time event.  

Image result for extrapolating cartoon

tax reformAccording to FactSet, almost 50% of the S&P 500s earnings growth has been from Trump Tax Breaks and no, they have not used that money to create more jobs (Trump has created far less jobs than any two Obama years) nor have they used the money to open new factories but they have bought back over $1Tn of their own stock – at record-high prices – isn't that clever?  

While $1Tn may seem like a lot of money, it's "only" about 2.5% of the US Market's $40Tn market cap though it does account for more than 1/2 of all inflows into the market in 2018 so, whenever you sell a stock, there's a 50/50 chance you are selling it back to the company!

Lowering the share count by 2.5%
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Monday Market Miracles – Do You Believe in the Fed? GDP? Santa Rallies?

What's it going to take to stop the bleeding?

NOW we have a bit of a correction going on as the S&P 500 closes the week at 2,600, more than 10% off the 2,940 high it posted in September, when Shanghai stocks were already down 20% and we were ignoring them and I said:

When people tell you that what happens to the second largest economy in the World doesn't effect the largest economy in the World, those people are idiots and you should never listen to anything they say to you – ever again.  Jamie Dimon of JP Morgan, for his part, is doing his best to minimize the concerns of retail investors so he can keep dumping stocks on them:

"If you look at tariffs on $200 billion (worth of Chinese goods), and this may all get passed on to American consumers and they have to pay another $20 billion (on Chinese imports), it's a $20 trillion economy, so the actual economic effect is not dramatic," Dimon said.

"We can add tariffs to more things and the Chinese can retaliate in other ways and I don't think all that's good. It's not a devastating thing, it's not a war, it's a trade skirmish that can have negative economic effects."

Dimon is not going to say what happens in China has no effect but he's mimizing the impact and misleading traders by using the 10% figure that costs $20Bn but that 10% tariff escalates to 25% at the end of the year ($50Bn) and then Trump plans to double the number of goods that are taxed ($100Bn) so a smart reporter


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Faltering Friday – Poor China Data Ends the Week on a Down Note

Image result for china slowdownNow what?

China's Retail Sales were "only" up 8.1% in November, below expectations of 8.8% and below October's 8.6% gains and Auto Sales were a real disaster, with a 10% drop from last year, the worst result in 7 years while Industrial Output rose 5.4%, missing the 5.9% expected.  Exports and Imports also slowed but, overall, China is still on track for their 6.5% GDP goal for the year – effectively getting the "soft landing" they had been looking for – trade war or no trade war.

China’s economy, if it’s in trouble, it’s only in trouble because of me,” Donald Trump told Fox News in an interview on Thursday.

Meanwhile, US Retail Sales were strong at 0.2%, double the 0.1% expected and October was revised up to 1.1% from 0.9% so all is still well with US Consumers so I don't see any reason why we should be putting in new lows, which would be 24,000 on the Dow (/YM), 2,600 on the S&P (/ES), 6,550 on the Nasdaq (no way) though the Russell (/RTY) is testing 1,420 for the 2nd time in a week so that would be the best line to make a bullish bet at.

Speaking of Futures trades, we got a nice move in Gasoline (/RB) yesterday that netted a lovely $7,634 gain on 3 contracts off the $1.42 line as Gasoline was getting stupidly low again, also testing the same bottom we played last week.  It's often worth playing double bottoms for bounces – especially if you keep tight stops below the line so that your risk is far less than the potential reward – those are the kind of trade set-ups we like to look for in our Futures trades.

We also look for patterns and, so far, all of this week's pre-market moves have been erased and this morning, at 8:50 am, /YM is down 188 at 24,400 and that's a great line to play bullish off of as 24,400 should be good support and, if it isn't, then take a quick loss and try again at 24,000.  The
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Thursday Flatline – Markets Drift Weakly into the Weekend

chart

"Well we know where we're going

But we don't know where we've been

We're on a road to nowhere

Come on inside

Taking that ride to nowhere

We'll take that ride" – T Heads

As you can see frojm they  S&P ETF (SPY) chart, we haven't done much of anything since Monday's open but it has been an exciting week as the S&P has had a 100-point trading range (4%) but each of these exaggerated moves in the Futures, whether up or down, seems to get dragged back to the middle once the real trading sessions (with volume) begins.

Date Open High Low Close* Adj Close** Volume
Dec 12, 2018 267.47 269.00 265.37 265.46 265.46 97,760,100


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Which Way Wednesday – Testing the Weak Bounce Lines – Again

Are we having fun yet?

Well, yesterday was a bust but they are going to try it again this morning with the Futures pumped up 250 Dow points driven by a diving Dollar, driven down by Trump's talk about a Government shutdown and theories that the Fed will not raise rates next week – especially after Trump said Powell is a "good guy" suddenly, after spening the past 3 months insulting him.

At this point, Trump is in the same position that Bernie Madoff was in after he was caught in his Ponzi Scheme only Trump hasn't ceased operations yet.  Still, no one came to Bernie Madoff for financial advice after that and you could see from Trump's meeting with Schumer and Pelosi yesterday that no one is coming to him expecting him to be Presidential anymore.  He's a joke and he's being treated like a joke but that's a dysfunctional Government and not very good for the Dollar – or the markets.

Image result for trump ransom noteAfter selling out our Nation's morals on Saudi Arabia's murder of Kashoghi, Trump is offering to ignore whatever it is he's saying Huawei's Founder's Daughter (their CFO) did in violation of the Iran sanctions in exchange for better trade terms.  He should have tweeted that using the "Cut up pieces of newpaper" font.

"Trump’s remarks appeared to undercut other officials in his administration who contended that Meng’s arrest — which came the same day he and Xi announced plans to break the trade impasse — was unconnected to the broader negotiations…

"'These remarks by Trump are extremely dangerous and reckless as he could be fueling thoughts about arresting American executives in China as bargaining chips,' said James McGregor, China chairman of the consultancy APCO Worldwide, which advises foreign companies. 'He is also feeding into the belief in China that the U.S. doesn’t really have an independent judicial system.'" (Bloomberg)

Related imageThat's right folks, the rest of the World now views us the way we used to view the Soviet Union.  Isn't that great?  

We made no progress in the markets yesterday and today we've got another chance to make those weak…
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Testy Tuesday – Trump’s China Tweet Gives Us Weak Bounces

Image result for trump china tweetThank you, Mr. President.

You can certainly fool at least some of the people all of the time as President Trump once again tries to fix the markets by tweeting out "Very productive conversations going on with China! Watch for some important announcements!" and that's all it seems to take to ramp the indexes up 1% in the Futures.  Well, that and the coordinated cooperation of his fellow Oligarchs, who have their hands on the market switches, of course.  

The above quote is from March but there are about 100 tweets from Trump telling us how great trade negotiations are going with China, going back over 18 months and EVERY TIME it somehow boosts the markets though, after 18 months of China talks, the market is lower now than it was when we started! 

So let's keep any sort of bounce today in context as we have fallen from 2,950 on the S&P (/ES) to 2,650 (and a quick spike below) so, with a 300-point drop, we expect a 20% bounce (60) to 2,710 (weak) and 2,770 (strong) and, so far, all we have is a weak bounce off the spike low to 2,600 – not that impressive.  Is Trump having trouble fooling even some of the people all of the time?   We're back at the lows but the bounce lines are the same as they've been since October at:

  • 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 


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Meaningless Monday Market Movement – Waiting for the Next Shoe to Drop

Are the dip buyers still out there?

That's not entirely clear anymore as we're testing a triple bottom on the S&P since late October and 2,950 to 2,650 is 300 points down and 2,800 is right in the middle and that's where we kept failing – not a very bullish sign and this dip has been faster than the first two so, if the bounce is weaker than the first two – that's a bearish pattern we'll be able to hang our hats on.

Trade talks with China did not improve over the weekend with Lighthizer saying March 1st would be a "hard deadline" while Navarro says "China's predatory days are over" – and those are our chief negotiators!  China is demanding that Canada release the daughter of Huawei's Founder and is treatening "further actions" against the US if the issue is not resolved and this is what happnes when people pretend to negotiate a trade deal but are actually only interested in sabotaging it so Trump can keep taxing (oh, sorry, tariffing) Americans on things they used to buy under free trade agreements.

Speaking of Trump – things have not been going well in Trump Land and that adds to the market uncertainty so I would take any move up this morning with a huge grain of salt.  Very simply, for the S&P, the 300-point drop leads to a 60-point weak bounce so that's the goal for today and failing that (we will fail that) then it's more likely we'll have to keep an eye on the floor tomorrow to see if that holds.

Meanwhile, both China and Japan had poor economic data over the weekend and riots continue in France for the 4th week with 136,000 people marching on Satuday leading to 2,000 arrests while Retail Sales are down $1Bn for the month and restaurant sales are down as much as 50% as people choose to stay home rather than navigate Paris' burning streets. 

If you wonder why you don't hear much about the Paris protests in the US – it's because the Yellow Vest Protests are about economic inequality and the Capitalists that own the media like to pretend there is no
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Friday Market Follies – Will Non-Farm Payrolls Give us a Flip or a Flop?

Image result for monks roller coasterWheeeee – what a ride!  

Down 800, up 700, what a fun day in the market.  Now we're only down 750 from Monday's open so we can make that up by 11, right?  I certainly hope you have your hedges as we literally could go 750 points either way off the Non-Farm Payroll Report at 8:30 this morning – especially if it shows more than 250,000 jobs created as that would mean the Fed really needs to raise rates before wages start eating into Corporate Profits and spur inflation.  Even though wage inflation is "the good kind" that makes the economy stronger – the Fed doesn't give a crap about that – the Fed is a banking cartel, not some Government entity there to help you and they are only interested in protecting Corporate Profits, specifically Banking profits, they could care less whether or not you have a job – what they care about is that, if you do have a job, you are paid as little as possible so you have to take out lots of loans and pay interest to the Banksters.  That is literally their primary function.

Why does the Fed not want inflation?  Because you take a fixed loan on your home of, for example, $250,000 and put down a $50,000 deposit and, at 4.5%, you pay $1,266.71/month (not including taxes, insurance, etc) for 360 months which works out to $458,933 (plus your $50,000 deposit) paid out on your $300,000 home.  The problem the Banksters have, however, is that the last $1,266.71 you pay them isn't worth as much as the first $1,266.71 you paid them due to inflation so they want inflation to be as low as possible to maximize your effective payments.  THAT is what the Fed is concerned about.  

Keeping inflation down means keeping wages down, which has the side-benefit of keeping you perpetually in debt and, hopefully, they can one day sock you with a 8 or 10% mortgage and then they really start raking in the profits!  At 8%, that same $300,000 house with a $250,000 mortgage goes up to $1,834.41/month and that's $665,596.45 paid over 30 years on that $250,000 you borrowed.  Sucker!!!  

By the way, funny
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Zero Hedge

Has E.T. Gone Home?

Courtesy of ZeroHedge. View original post here.

UFO sightings have been making headlines again lately, notably with The New York Times running an interesting article about several U.S. Navy fighter pilots encountering mysterious objects near the southeastern coast of the United States.

That high-profile story remains unexplained and so do plenty of other UFO sightings reported by members of the public every year like strange lights crossing the night sky or orange disks hovering in the distance.

However, as Sta...



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Phil's Favorites

Food waste: using sustainable innovation to cut down what we throw away

 

Food waste: using sustainable innovation to cut down what we throw away

shutterstock.

Courtesy of Mehrnaz Tajmir, University of Bath and Baris Yalabik, University of Bath

Our appetite for food is a serious problem. The huge amount of energy, land and water used to fill our supermarket shelves mean that modern overproduction and excessive consumerism are rapidly depleting resources and damaging the planet.

Yet still, more than one-third of the world’s food...



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Kimble Charting Solutions

Doc Copper Is Pushing Higher Off 18-Year Rising Support, Says Joe Friday

Courtesy of Chris Kimble.

Gold & Silver have been hot of late! Is Doc Copper about to do the same? Possible says Joe Friday.

This chart looks at Copper Futures over the past 27-years. Copper has spent the majority of that time inside of rising channel (1).

The decline over the past year has Doc Copper testing 18-year rising support and lows of the past 8-months at (2).

Joe Friday Just The Facts Ma’am- Copper is attempting to rally off of long-term support at (3). As Copper is testing the bottom of this support channel, smart money hedgers are making a bi...



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Insider Scoop

Benzinga's Top Upgrades, Downgrades For July 19, 2019

Courtesy of Benzinga.

Upgrades
  • For American International Group Inc (NYSE: AIG), William Blair upgraded the previous rating of Market Perform to the current rating Outperform. American International Gr earned $1.58 in the first quarter, compared to $1.04 in the year-ago quarter. American International Gr's market-cap stands at $48,358,299,270. At the moment, the stock has a 52-week-high of $56.49 and a 52-week-low of $36.16. American International Gr c...


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Chart School

RTT Plus Chart Book (Sneak Peak)

Courtesy of Read the Ticker.

The magic of support and resistance channel lines and how they direct price. Here are some chart disclosed to members via the RTT Plus service. All charts are a few weeks old. 


XAU bound by parallel channel lines.


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Newmont Mining support from Gann Angles.



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US Dollar index (DXY) dominate cycle ...

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Digital Currencies

Cryptos Suddenly Panic-Bid, Bitcoin Back Above $10k

Courtesy of ZeroHedge. View original post here.

Following further selling pressure overnight, someone (or more than one) has decided to buy-the-dip in cryptos this morning, sending Bitcoin (and most of the altcoins) soaring...

A sea of green...

Source: Coin360

Bitcoin surged back above $10,000...

Ethereum bounced off suppo...



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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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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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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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