Phil's Newsletter

Just Another Manic Monday

Image17,400 infected (double SARS), 364 people dead.  

On the bright side, only 2% mortality is down from 3% but maybe that's because the rate of infection are exploding fastert than people are able to die.  There were 10,000 infections on Friday and 213 deaths so 74% more infections and 71% more deaths isn't exactly what we usually call "under control" over a weekend, is it?

The Shanghai Stock Exchange re-opened from their New Year's holiday down 7.34% and, as I explained to our Members in Friday's Live Chat:

China rally has same low volume problem as US so they will be lucky not to fall 7.5%  Monday, which is pretty much limit-down in China since they halt stocks at 10% so very hard to get the average for the index past -7.5%. 

China is trying to stop the slide by stepping in economically, with the PBOC pushing in a massive $173Bn stimulus measure as well as a cut in the reverse-repo rate to push liquidity back into the system (something our own Fed has been doing since November).  Short selling has also been halted on the Chinese markets.  Apparently, oil demand in China (the World's 2nd largest consumer) was down 20% in January and that will get worse for February as more and more people are in the ever-expanding quarantine zone.  

Hong Kong's Carrie Lam (pictured) is fighting her own people who want to shut down the boarder with China and she doesn't exactly inspire that "Don't Panic" vibe wearing a mask when she's interviewed, does she.  Hong Kong's hospital workers voted 3,123 to 10 to shut down the boarders and they are going on strike today to attempt to foce a shutdown before they are overwhelmed by an epidemic they feel can get quickly out  of hand.  

My kids asked me why people in America don't seem to be worried about the virus and I told them to picture the Earth as a ball and us as ants and we hear rumors about a fire on the other side of the ball but we can't see any
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Fall Back Friday

Very bouncy but still not getting over the hump.

As we noted yesterday, 3,280 on /ES is the line to watch and we keep failing it – not a good sign into the weekend.  Unfortunately, the Dow dropped 140 points back from yesterday's rocket close and despite Amazon's 12% pop this morning (not a Dow component but boosting all indexes), which is keeping the Nasdaq green, at least.

People staying home with the flu is good for AMZN.  We're now over the 10,000 infection mark (213 deaths) but it does seem to be slowing for the moment, so that's a little encouraging.  We'll have a far better idea of the situation after the weekend but the US issued a Level 4 Travel Advisory for China, which is essentially saying DO NOT GO TO CHINA – so things are certainly not under control either.  

Image result for amazon sales over time 2019"AMZN's stock price is still out of control at $2,085 this morning as their "terrific" earnings were actually just $6.47/share so $23.01 total for 2019 means they are still trading at close to 100x their actual earnings and, on the whole it's barely up from 2018's $19.80/share. 

You might pay 100x earnings for companies that are going to grow their earnings 5 times in the near future but, to do that, AMZN would have to make $50Bn vs the current $10Bn and they currently have $280Bn in sales so Amazon would need to get close to $1Tn in sales before hitting $50Bn – 15% of all US Retail Sales!?!

Amazon Web Services is responsible for $10Bn in revenues and $2.6Bn out of $3.88Bn in profits – the Retail Operation is practically a loss-leader.  I really don't see how that's going be an engine for growth to justify the company's Trillion-Dollar price tag.

Have a great weekend, 

- Phil

 





GDPhursday – Is the Rally Getting Old or is it Just a Virus?

Image8,000 infections, 170 deaths.  

That's the number we're up to this morning but it is less than 9,000 so not getting wose though the rise in deaths to 170 is disturbing from 106 yesterday.  1.7% is the number I'm more concerned with as that is the Fed's most recent estimate for our Q4 GDP and you would think they would know but this is just the first estimate for Q4 – so the number we hear this morning is a lot more like a guess than a statistic anyway.

We guessed we hadn't heard the last of the coronavirus in yesterday's Live Trading Webinar (replay available here) and we shorted the S&P (/ES) Futures way back at 3,285 and they are already down to 3,245 for a $2,000 gain, per contract (you're welcome!) and the Nasdaq (/NQ) Futures we shorted at 9,142.50 are now down to 9,037 for a gain of $2,110 per contract – not bad for a day's "work", right?

In the bigger picture (there's always a bigger picture) we're simply retesting Monday's low's and we made a lot less money than we did on Monday because, on the whole, we only had a strong bounce which quickly failed and now we're retesting the lows so, if we only get a weak bounce now and that fails – look out below!   But, for now, we'll take our quick profits ooff the table and re-enter shorts below the 28,500 line on the Dow (/YM) Futures with tight stops above. 

Here are the bounce lines for the S&P 500, as calculated by our Flawless 5% Rule™:

We predicted all the index bounces on Monday for our Members in our Live Chat Room at 10:52 and, so far, the indexes have done exactly what we expected, which is actually bad because we expected this would be the start of a breakdown…  Oh well…  

What we're looking for today is signs that the rate of viral infections is slowing (more important than deaths acellerating) and, chart-wise, we'll be looking for more than a weak bounce.  If the weak bounce
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Whipsaw Wednesday – Apple and Boeing Boost Us Ahead of the Fed

Image result for coronavirus infections"6,000 infections.  

It's still growing at 50% per day and 132 people are now dead, 30% more than yesterday yet the markets are up on good news from Apple (AAPL), who beat earnings by 10% and Boeing (BA), who "only" expect an $18Bn write-down on the 737 Max – so far.  Boeing only earns $10Bn a year so 2 years of earnings are shot to Hell and the plane still isn't certified to fly again yet BA stock is back to $325 pre-market – up over 2.5% on the news.  I'm starting to think all the lithium from those batteries we're using is leaching our brains and rendering traders incapable of worrying about anything…

No one seems to care so I'm not going to spend time discussing it this morning.  Just keep an eye on the rate if increase and, if it gets worse – then it is time to worry!  Not that 50% per day is better but steady is much better than worse.  We can deal with 9,000 (more than SARS), 13,500, 20,250, 30,000, 45,000, 67,500 – but next Wednesday, if we are at 100,000 cases or more – then we'll be on the edge of a Global Catastrophe.  Hopefully the spread will slow by then but don't be the last one to be worried if it doesn't.

Unfortunately, the only other big thing going on is Trump's Impeachment – and we're all sick of that too.  The GOP is so sick of it they are desperately trying to block John Bolton from testifying because he was right there and was an eye-witness to the whole thing and could settle the matter of what actually happened.  Where's the fun in that?

Trump and Netanyahu (who is also being indicted on corruption charges) have unveiled their "Deal of the Century" Peace Plan for the Middle East that has already been firmly rejected by the Palestinians – even though Trump offered to give them $50Bn (of your money) to accept it.  It's not surprising as no one bothered consulting the Palestinians during the drafting of the agreement – it was simply announced yesterday as Trump and Bibi unveiled their new map, which seems to have…
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Technical Tuesday – Recovering Already?

Health workers disinfected a residence in Ruichang, China, a city in Jiangxi Province. A coronavirus outbreak that has left more than 100 people dead began in the neighboring province of Hubei. 4,500 infections

That's a 60% jump since yesterday's official count and clearly we're over 5,000 now in real time but "only" 106 deaths, so down to 2% but, to be fair, new infections are happening so fast the deaths can't catch up with them so quickly.  China is already working on a second 1,000-bed hospital for the Coronavirus Patients – that should tell you enough right there.  Also, they've already run out of testing kits – so the number of patients could be substantially higher than estimated.  

Again, I don't want to be in the position of being the prophet of doom but my job is to point out potential concerns that lie ahead for the market and this is a very big one at the moment.  That guy is walking around with a fire stick – FIRE!  When you need to burn out an infection – it's probably serious…

Waiting for medical attention on Tuesday at the Wuhan Union Hospital, near the epicenter of the coronavirus outbreak.Hong Kong has 8 virus cases and will be implementing a broad series of restrictions aimed at controlling the spread of the coronavirus by limiting the number of mainland Chinese travelers entering the territory.  The restrictions, which included the suspension of high-speed and other train services between Hong Kong and the mainland, a 50 percent reduction in the number of flights, and a ban on tourism visas for many travelers, were announced by Carrie Lam, the city’s chief executive. 

In major cities like Beijing and Shanghai, many people have to stand in line in the wee hours of the morning to secure appointments with doctors. When they do get an appointment, patients get only a couple of minutes with a doctor. During flu season, residents set up camp overnight with blankets in hospital corridors.  Videos circulating on Chinese social media show doctors straining to handle the enormous workload and hospital corridors loaded with patients, some of whom appear to be dead.

Image result for coronavirus vs sarsAgain, I am
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Monday Market Mayhem – Viral Outbreak Infects Global Markets

Image result for spanish flu animated gifGlobal markets are down more than 1%.

Chinese markets are closed for the holidays or they would be down too as about 3,000 people are now infected by the coronavirus and it was 1,000 when I warned about it on Thursday so we're close to 50% daily increases in infections and we still aren't clear on the incubation period of the virus and we have no treatment for it either.  That is, as we say in the medical community – NOT GOOD!  

Unfortunately, the breakout is imitating the pattern of the Spanish Flu (influenza), which devastated the planet, ultimately infecting 500M people and killing 25M (5%) of them in 1918.  Even with our much more modern medicines, the death rate on the coronavirus is at 3% but modern medicine comes at a price and hospitalizations quickly run into thousands of Dollars and even if 500M people can be treated for $2,000 (mostly not in hospital, of course), we're talking about $1Tn of emergency aid required (1% of Global GDP) - plus money that needs to be allocated to prevention, education and support.  

Members of a military medical team were deployed to Wuhan on Sunday.

Do you have an extra $1,000,000,000,000 set aside in case of emergency?  We'll find out who does and who doesn't as China has already pledged $9Bn to help contain the virus and, if you do the math, that's $3,000 per infected patient in a country where health care costs are 1/4 of what we spend in the US.  Let's hope the infections level off soon but there's not likely to be a quick fix to this thing and, even in the best case, China is shut down for 2 weeks and that's going to hit the GDP for about $400Bn (2.8%) – so the effect on Global Markets will be lingering.

Speaking of $400 (M in this case) – it turns out Trump DID specifically and directly tell John Bolton, way back in August, that he was withholding military aid to the Ukraine unless they agreed to investigate Joe Biden.  Since Trump's own lawyers have said that the only way he should be impeached is if you could directly tie…
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PhilStockWorld January Portfolio Review

Image result for one million dollars animated gif$644,380!  

No we didn't make $500,000 – we actually lost about $9,000 in the past month as the TSLA trade blew up on us but that's our grand total now as we finally started a new Long-Term Portfolio (LTP) with $500,000 along with our Short-Term Portfolio (STP), that was at $144,380.  Generally, we've simply changed the STP to the LTP and moved the hedges out of the new LTP to the STP and added $400,000 in virtual cash to the LTP and NOW we are ready to get serious playing the market with our main, paired portfolios.  

Essentially, we made $44,380 while we've been waiting around for a good time to deploy more cash.  Of course we cashed in $3M last year so we're only re-deploying a small portion of it but that's appropriate for the still-uncertain market we're in now and, anyway, we started with the same $600,000 back in Jan, 2018 so it's much more fun to build it all up again, isn't it?  

Last month, we were worried about Iran and, frankly, I don't even remember why anymore as it's all about Coronavirus now although Trump's Impeachment still looms large in the background.  Still, it's earnings season and we've already fired off 4 Top Trade Alerts in January and last week we added a few early trades to the New LTP already. 

Here's this month's collections of our trade reviews from last week's Live Member Chat:

Short-Term Portfolio Review (STP) This is now the Long-Term Portfolio (LTP) and we'll make a new STP to cover these positions.  Mechanically, we're moving $400,000 into this portfolio and making a new $100,000 STP whose main function is to protect the new LTP (so looking more for bearish opportunities than bullish ones).  

The STP is at $144,380 and that's down $9,118 from our last review, pretty much entirely due to TSLA going off the rails on our short calls.  We'll deal with that and decide which positions stay and which ones go in our new LTP:

  • CBS – Keeper 
  • CSCO – Keeper 
  • M – Keeper 
  • CMG


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Faltering Friday – Coming to the End of a Weak Week

We're in danger of having a down week.

We opened on Monday at 3,321 on the S&P 500 and we closed last night at 3,325 so it won't take much for us to dip under and close the week in the red.  As you can see from the chart, if not for that silly gap up into Wednesday's open (which we shorted!), it's doubtful we'd be even close to green now.  

Speaking of shorting, our current position is 2 short Nasdaq (/NQ) contracts at an average entry of 9,271.50 and I'd be more likely to add to them if they go higher than stop out ahead of the weekend with China now "locking down" 40M of their citizens (only 2.5%) with travel restrictions on 10 cities as cases have now spread to 32 of China's 34 provinces.  The markets got a boost yesterday when the WHO decided NOT to declare a Global Emergency (yet) but that's only because the virus has, so far, been fairly contained to China – for now, I'd rather be safe than sorry with our hedges (see yesterday morning's PSW Report).  

relates to China Locks Down 40 Million People as Anger Grows Over VirusAs noted by Bloomberg:  The turmoil comes as the virus stymies efforts to track infected patients. While the death toll continues to rise — and now includes someone as young as 36 — some infected patients aren’t showing a fever, a symptom governments around the world have been using to screen for the pathogen.  Even Disneyland in Shanghai is closing down so it might be time to short Booking (BKNG) again – though we already missed a 5% drop.

I'm not a doom and gloom kind of person but, to put it in perspective, in a usual year, about 30M people around the World get the flu and 60,000 people die (0.2%), mostly people who are old and sick in the first place (not that that makes it better but it's understandable).  So far, out of 830 confirmed cases, 26 people are already dead (3%) but, more alarmingly, over 100 people are in critical care units in hospitals – and some of them are young people.

It's the way the Governments are scrambling…
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Faltering Thursday – Our Index Hedges Finally Pay Off!

Well, it had to happen some time.

After serveral attempts to make some money shorting the Index Futures we hit the jackpot in yesterday Morning's PSW Report, when I said to our Members:

It doesn't matter what happens during the day, in the overnights, we rally to new highs.  Oddly enough, we've been making our money on the short side (see last week's Webinar) by playing the indexes short when they peak and selling on the dips so this morning we're doing it again at 9,240 on the Nasdaq (/NQ) Futures, 3,335 on the S&P Futures (/ES) and 29,280 on the Dow (/YM) Futures.

Meanwhile, we're stubbornly long on Natural Gas (/NG), which is now at $1.90 but our average entry is $1.962 and we already have 4 long.  

As you can see from the image above, we hit our goal this morning (as discussed in yesterday's Live Trading Webinar) so we're taking the money and running but we'll re-establish on a pullback.  It's a nice $2,320 gain on the day, so we don't turn that away and we'll also cash out our Index Futures, now at 9,190 on /NQ for a $1,000 per contract gain, 3,313 on /ES for a $1,100 per contract gain and 29,050 on /YM for a $1,150 per contract gain.  Now, wasn't yesterday's PSW Report worth your $3?  If so, don't forget to SUBSCRIBE HERE!  

We played yesterday bearish because there was now NEW news that justified the move up and, this morning, there's no NEW news justifying the move down so we'll cash out and wait for something interesting to happen.  The most interesting thing happening at the moment is the Chinese coronavirus that has sent the Chinese markets down 5% already this week and our 5% Rule™ says a weak bounce is 1% and a…
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Which Way Wednesday – Rallying Back to the Highs (Again)

This is just amazing.

It doesn't matter what happens during the day, in the overnights, we rally to new highs.  Oddly enough, we've been making our money on the short side (see last week's Webinar) by playing the indexes short when they peak and selling on the dips so this morning we're doing it again at 9,240 on the Nasdaq (/NQ) Futures, 3,335 on the S&P Futures (/ES) and 29,280 on the Dow (/YM) Futures.

Meanwhile, we're stubbornly long on Natural Gas (/NG), which is now at $1.90 but our average entry is $1.962 and we already have 4 long so we either get back to 2 even or we wait for $1.80 to add 2 more longs and bring the average below $1.90 (with a $6,000 loss on 6 contracts).   It's a long-term conviction play and could get very painful as we're bucking the overall trend.

I reviewed our logic on the Natural Gas plays in yesterday's Live Member Chat Room and we're doing another Live Trading Webinar this afternoon at 1pm, EST, so I'm sure we can discuss it some more.  The strong(ish) Dollar hasn't been helping the commodities very much.  Oil is still down in the dumps at around $57.50, which is a nice place to go long (/CL) with tight stops below that line, which should match up with $64 on Brent (/BZ) – so if Brent fails to hold, don't play /CL long!

Not that the news seems to matter these days but President Trump is back to threatening tariffs on Europe in an attempt to force them to make a Trade Deal with him because he needs the distraction to take away from his impeachment trial.  One thing that's distracting everybody at the moment is the Chinese virus scare, with 50% more cases today than there were yesterday (now 470) so no, it's not at all under control.   The US case that panicked our markets yesterday was from a guy who was in China recently and it does seem to be contained (so far). 

In drugstores and at airports, and on the online…
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Phil's Favorites

These scientists are using DNA to target new drugs for your genes - Medicine made for you part 1

 

These scientists are using DNA to target new drugs for your genes - Medicine made for you part 1

By Science Photo/Shutterstock

Courtesy of Annabel Bligh, The Conversation; Gemma Ware, The Conversation, and Holly Squire, The Conversation

Welcome to the first episode of Medicine made for you, a ...



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Biotech & Health

These scientists are using DNA to target new drugs for your genes - Medicine made for you part 1

 

These scientists are using DNA to target new drugs for your genes - Medicine made for you part 1

By Science Photo/Shutterstock

Courtesy of Annabel Bligh, The Conversation; Gemma Ware, The Conversation, and Holly Squire, The Conversation

Welcome to the first episode of Medicine made for you, a ...



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Zero Hedge

Jaguar Land Rover UK Factory To Run Out of Chinese Parts In Weeks

Courtesy of ZeroHedge View original post here.

The amount of supply chain disruptions that are coming out of the woodwork is nothing short of astonishing. This could shock the hell out of the global economy, forcing a trade recession that would lead to a readjustment of stock prices. At this moment, central bankers are terrified, because monetary policy i...



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The Technical Traders

Is The Technology Sector Setting Up For A Crash? Part II

Courtesy of Technical Traders

In the first section of this article, we highlighted three key components/charts illustrating why the “rally to the peak” is very likely a result of a continued Capital Shift away from risk and into the US stock market as an attempt to avoid foreign market growth concerns.  This method of pouring capital into the US stock market is a process that is driving incredible asset rallies in the US technology sector.  Already the US technology sector (FANG and our Custom Technology Index charts) are up almost 15% in 2020.  How long will it last and when will it end?

Recently, China has revised the Coronavirus data with a sharp increase in infection cases – now ov...



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Kimble Charting Solutions

Tech Leader Facing Important Long-Term Breakout Test!

Courtesy of Chris Kimble

Since the 2009 lows, Semiconductors have been taken a leadership role as they have far outpaced the gains of the S&P 500.

Gains since the 2009 lows; SOXX Index = +821% S&P 500 = +273%.

The SOXX index has spent the majority of the past 10-years inside of rising channel (1), which first started at the  2009 lows.

As the SOXX index is testing the top of this 10-year rising channel, it is also testing its Fibonacci 423% extension level of its 2001 highs and 2009 lows at (2).

This leading index would send a positive message t...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.



Date Found: Tuesday, 01 October 2019, 02:18:22 AM

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


Comment: Wall of worry, or cliff of despair!



Date Found: Tuesday, 01 October 2019, 06:54:30 AM

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


Comment: Interesting.. Hitler good for the German DAX when he was winning! They believed .. until th...



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Insider Scoop

6 Consumer Cyclical Stocks Moving In Tuesday's Pre-Market Session

Courtesy of Benzinga

Gainers
  • Tesla, Inc. (NASDAQ: TSLA) shares rose 6.9% to $855.12 during Tuesday's pre-market session. The most recent rating by Morgan Stanley, on February 18, is at Underweight, with a price target of $500.00.
  • Foresight Autonomous, Inc. (NASDAQ: FRSX) shares moved upwards by 5.8% to $1.10.
  • NIO, Inc. (NYSE: NIO) stock surged 2.4% to $3.87. The most recent rating by Piper Jaffray, on December 03, is at Neutral, with a price ...


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Members' Corner

How to Stop Bill Barr

 

How to Stop Bill Barr

We must remove this cancer on our democracy.

Courtesy of Greg Olear, at PREVAIL, author of Dirty Rubles: An Introduction to Trump/Russia

...



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ValueWalk

Russell 2000 Index (RUT) hits an almost one-month high

By Gorilla Trades. Originally published at ValueWalk.

Ad the Russell 2000 Index (INDEXRUSSELL: RUT) hit an almost one-month high today, commenting on today’s trading Gorilla Trades strategist Ken Berman said:

Q4 2019 hedge fund letters, conferences and more

Russell 2000 Index (INDEXRUSSELL: RUT) Outperforms Large-Cap Benchmarks

While the overnight session was nothing short of scary stocks held on to most of yesterday's gains and small-caps even extended their winning streak. The Russell 2000 Index (INDEXRUSSELL: RUT) hit an almost one-month high today, finishing higher for the fourth day in a row while outperforming the large-cap benchmarks, and since the Volatility...



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Digital Currencies

Bitcoin Price May Hit $27K All-Time High By Summer, Predicts Fundstrat's Tom Lee

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Bitcoin is primed for average gains of almost 200% over the next six months, one of its best-known supporters has told mainstream media. 

...



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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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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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