Phil's Newsletter

Which Way Wednesday – Toppy or Just Getting Started?


That's where the Nasdaq is this morning and, just a week ago, we were wondering if they could hold 16,000.  325 additional points is up over 2% for the week and the Nasdaq is up 1,850 points (12.7%) since October 1st and up 3,500 points (27%) for the year.  Now, I'm not going to tell you a 27% annual rally is unsustainable – I'm just going to tell you that people who say it is sustainable are idiots…  Why?  Math.

To demonstrate – use this link and make the "Initial Deposit" $10,000 and let's say that's your Nasdaq Portfolio.  Now set "Contributions" to $0 – let's say you don't add anything to it and don't collect dividends.  The "Investment Time Span is 5 years – we'll leave that for now.  Then set the "Estimated Rate of Return" to 27%, compounded annually.  The chart on the right shows you have $33,039 after just 5 years – up 230%.  

Now change it to 10 years and you have $109,154 and 20 years is $1.19M and 30 years is $13M – see how easy it is to retire wealthy – just put $10,000 in the Nasdaq today and you're a rich man in 30 years!  Even better, put $100,000 away today and you'll have $130M in 2052. 

Now, you KNOW that makes no sense because everyone would have hundreds of Millions of Dollars and money would be worthless.  But, if you KNOW that is impossible – then why assume these market gains are sustainable when, MATHEMATICALLY, they are not.  

If you are in a market that is experiencing unsustainable gains then, at some point – IT WILL CORRECT.  A correction is NOT a pullback – a correction is a move towards a CORRECT level that IS sustainable.  Historically, that has been 8% annual growth.  

From 2000 until 2010 the Nasdaq was below the 2,500 line and it hit 5,000 (again) in 2015 but, if we use 2010 as a base and give 5,000 points 8% growth for 12 years – we get to 13,058 – THAT is trend growth for the Nasdaq and we're 25% over that.  Perhaps give us 10% for inflation and the rest is stimulus but none…
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PhilStockWorld November Portfolio Review – Part 1

Up and down we go! 

In our September Portfolio Review (16th), we were down about 50% in the STP at $94,705 but our October Review (12th) caught the dip and the STP blasted back to $128,727 but now the S&P is back at record highs and the STP is back to $91,022 and that's down 54.5% but we still have $156,199 in cash so there's no need to add money yet – but it is a good time to improve our hedges.  

The STP's primary function is to act as a hedge for our bullish positions in the Long-Term Portfolio, which we'll review at the end of the week.  The LTP is at $2,210,453 at the moment, up 342% overall, up $79,858 ($2,130,595) since our October 15th review.  So up $79,858 in the LTP and down $37,705 in the STP is up net $42,153 and that's the number we care about.  Sure we could have made more money if we had less hedges but we went back to mainly CASH!!! in August and we've been cautious into the end of the year and will remain so until Q1 earnings are over.

The LTP/STP paired portfolios are at a record-high $2,301,475 from a $600,000 start on 10/11/19, so we're up $1,701,475 (283%) on our 2nd anniversary – isn't that worth protecting?  And it's the protection we have in the STP that allows us to be so aggressive when adding new longs to the LTP – which we did a lot of during the October dip (see our October Top Trade Alerts as examples).  

Now it's time for Thanksgiving and we'll be picking our Trade of the Year in two weeks and that is the option trade I feel will most likely return 300% by the end of the following year.  We've never been wrong about a Trade of the Year but we did miss our timing twice – fortunately we always give ourselves 2 years – just in case.  

Since we're just about at what I think may be a pre-correction market top – we're going to get more aggressive with our hedges this morning:

  • SKF – We thought the Financials might falter in an inflationary cycle and they did not

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Monday Meltdown – Asia’s Economy Tanks, Oblivious US Indexes back to their Highs

Disney Alice in Wonderland – Limited Edition Canvas | Thomas Kinkade StudiosIt's fun to ignore reality.

Or to imagine that the World is more fun than it is with less Covid and less Global Warming and less Inflation and better GDPs, etc.  Reality, however, can be a harsh mistress and ignorning reality can be harsher still – eventually.  But not this morning as our indexes are back around their record highs – even as China's Industrial Production coming in at 3% – the worst since Q2 of 2020 while their PMI is also collapsing – worst since February of 2020 – when the country was first shut down.

An energy crunch over September and October coupled with elevated cost pressures is squeezing Corporate Profits and hitting Factory Output in the World's 2nd-largest economy, yet over here we act like nothing that happens in China could possibly affect the US markets or our economy.  

Falling real-estate prices and credit-market turmoil for heavily indebted developers means fixed asset investment in the first 10 months of the year is expected to have slowed to 6.2% from 7.3% previously.  Chinese economists warn that the downturn in real estate — which accounts for up to 25% of output — could hurt the wider recovery.  Goldman Sachs (GS) and others warn China could see sub-5% growth next year. 

Japan releases figures on Monday that are expected to show the recovery of the world’s third-largest economy slipping into reverse after hitting a summer virus wave and global supply-side glitches.  A particularly bad result could fuel even more stimulus from Prime Minister Fumio Kishida later in the week, when he decides on a package of economic measures. Trade and inflation numbers also come out from Japan this week. 

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TGIF – Winding Down a Weak Week

Danger ahead.

We passed the stimulus bill – that did not strenghten the market.  The Fed did not change rates and only began a very gradual tapering process – that did not strengthen the market.  Q3 earnings were better than expected – that did not strenghten the markets.  What will?

We are in a very overbought situation at the moment and, heading into the holidays – it's always a good idea to be well-hedged but the thin market trading around the holidays is the bulls' best friend at the moment as it's the high-volume days that tend to send things lower.

Still, proceed with caution in the two weeks before Thanksgiving and then, if we have made it through November – we might have a Santa Claus rally after all.

According to Indeed, there were more than 11M job openings in early November, far more than the 7.4M people who are considered unemployed.  We used to fill those jobs with immigrants but those were made illegal under the last administration so now they just sit empty – for reasons we discussed in yesterday's PSW Report.   Many of the open jobs are in Warehousing, Shipping and Consumer-Facing Retail, a trend that is likely to be supercharged by the holiday shopping season and strong consumer demand.

4.3M workers quit their jobs in August, as workers are only just beginning to exercise bargaining power for their labor.  With 11M open jobs – there's always someone willing to pay more if your boss is not and workers are starting to understand that – a condition similar to the one we had in the late 80s and 90s – when 10% annual raises and two-week bonuses were expected.  

Labor-force participation, or the share of working-age people employed or looking for work, has remained lower than normal despite strong job growth during the recovery. Employers, especially in lower wage sectors like food service, might normally hire workers who are unemployed, but are now looking to entice people to leave their current jobs for better pay or benefits.

New openings, especially seasonal ones with set end dates, are growing rapidly. The National Retail Federation, an industry group, anticipates that retailers will hire 500,000 to 665,000 seasonal workers compared with the 486,000 they hired…
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Inflationary Thursday – Prices Rising Most in 30 Years


That was the jump in the Consumer Price Index, which measures what consumers pay for goods and services, from last October.  Even worse, the Core CPI, which excludes food and energy, was up 4.6% – miles over the Fed's 2% price target.  That's the fastest 12-month change since 1990 and our 5th consecutive month topping 5%.

On a monthly basis, the CPI increased a seasonally adjusted 0.9% in October from the prior month, a sharp acceleration from September’s 0.4% rise and the same as June’s 0.9% pace.  Price increases were broad-based, with higher costs for new and used autos, gasoline and other energy costs, furniture, rent and medical care while prices fell for airfare and alchohol – saving us from a total disaster – for now.

Consumer spending increased at an annual rate of 1.6% in the third quarter, a sharp slowdown from a 12% increase in the prior quarter. However, much of that deceleration was due to scarcity of new cars and other durable goods. Consumer spending on services last quarter climbed at the brisk annual rate of 7.9%.  Businesses are also passing on higher costs to consumers. 60% of small-business owners said they had raised prices in the previous 90 days.  80% of the companies surveyed reported higher labor costs, while 72% said vendors had increased prices and more than half experienced higher costs for raw materials and other inputs.

We still have labor shortages, shipping shortages, chip shortages, auto shortages… – this stuff is not going to go away but the Fed continues do downplay the situaion, which is a polite way of saying they are lying to us.  How can it be a good thing when the Fed is lying?  They are lying to give themselves and excuse to continue a policy (QE + ZIRP) that is at the root of this inflationary catastrophe.  

The dearth of workers needed to meet consumer demand is also putting upward pressure on wages, adding to companies’ motivations for raising prices to offset higher labor costs. Higher food and energy prices—driven up by pandemic-related production snags, weather and geopolitical factors—are also spurring inflation, said Richard F. Moody, chief economist at Regions Financial Corp.
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Which Way Wednesday – Testing Nasdaq 16,000 From Above

Two planets are talking to each other. One looks like a beautiful blue marble and the other a dirty brown ball.

“What on earth happened to you?” the beautiful planet asks the brown one.

“I had Homo sapiens,” answers the brown planet.

“Don’t worry,” says the blue planet. “They don’t last long.”

Delegates and media watching Prime Minister Boris Johnson of Britain during his opening speech of COP26 summit, in Glasgow, Scotland.That's a joke from the climate summit in Glasgow where, as noted by Thomas Friedman, the mood is generally dire.  

The evidence on Climate Change was overwhelming when we signed the Paris Climate Accords in 2012 and even more so when Trump and his ilk tore up those accords in 2017 and now, on the cusp of 2022, the evidience that this planet is heading for a horrific crisis is incontravertable and there are no more deniers – just blamers.  

What there are still not is fixers – no one is doing enough to address this crisis and it's gotten to the point where you have to consider that it's too late to stop the Global Warming that will have catastrophic effects on our environment so perhaps the money is better spent moving the human race underground or something – to hopefully live out the damage in a cooler environment.  Why waste money preventing a catastrophe we can no longer avoid, right?  

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Toppy Tuesday – S&P 4,700 and Bust?

Despite S&P 500 rally, only 16% of members are at 52-week highs16%.

That's the percentage of S&P 500 stocks that are trading at their 52-week highs while the index itself is at a record 4,700.  That is historicially narrow participation, the kind that often precedes a correction.  If you think about it, since ETFs rule these days – the S&P 500 rally SHOULD be the rising tide that lifts all ships but what's really happening is the Banksters, who along with their Top 0.1% clients own 80% of all equities, are manipulating the heavily-weighted stocks to prop up the indexes while they are dumping the bulk of their over-priced holdings – just like they do at the end of every rally.  It's their job

In the Fed's 85-page Financial Stability Report published moments after the market close yesterday, the Fed warned that as Bloomberg put it, "prices of risky assets keep rising, making them more susceptible to perilous crashes if the economy takes a turn for the worse" adding that “asset prices remain vulnerable to significant declines should investor risk sentiment deteriorate, progress on containing the virus disappoint, or the economic recovery stall."  You know, what I've been saying all summer but now it's from the Fed – so people might listen.

As noted by Zero Hedge:

The Fed's full view of the current level of vulnerabilities is as follows:

  1. Asset valuations. Prices of risky assets generally increased since the previous report, and, in some marketsprices are high compared with expected cash flows. House prices have increased rapidly since May, continuing to outstrip increases in rent. Nevertheless, despite rising housing valuations, little evidence exists of deteriorating credit standards or highly leveraged investment activity in the housing market. Asset prices remain vulnerable to significant declines should investor risk sentiment deteriorate, progress on containing the virus disappoint, or the economic recovery stall.
  2. Borrowing by businesses and households. Key measures of vulnerability from business debt, including debt-to-GDP, gross leverage, and interest coverage ratios,

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Just Another Manic Monday

DOW 36,000!Dow 36,000!  

We're finally here.  Just a little late as this book was published in November of 2000 arguing that stocks in 1999 were signigicantly undervalued and traders did not understand the "new paradigm" and that the Dow would go up 4 TIMES in the next 4 years.  Well, 22 years later they are finally "right" and the Dow closed last week at 36,327.  

If we consider inflation to average 3% over 22 years, the Dow SHOULD be around 16,000 with inflation alone.  Inflation, however, has an interesting effect on the market as it also inflates earnings – even though the earnings, in real-dollar terms, as no more than they were before the inflation.  

In other words, if I sell you a hamburger I make for $1 for $1.50, I make 0.50 in profits but, if I price it in Pesos, which are 2 for a Dollar, then I sell you a hamburger for 3 Pesos that cost me 2 Pesos to make and I make 1 Peso.  It's the same thing, we're just measuring it differently.  That's where people get confused because we're comparing Dollars to Dollars and people can't get their head around the fact that a 2021 Dollar is not the same as a 1999 Dollar – but they are different as Pesos and Dollars are today!    

So the stock making a profit of 0.50 selling hamburgers and getting a 20x multiple would be valued at $10 while the stock making a profit of 1 Peso and getting the same 20x multiple would be valued at 20 Pesos – much more, right?  No, it's the exact same thing and so is a stock that was making 0.50 in 1999 but is now making $1 – the stock price may have gone from $10 to $20 but it's the exact same real value as it was back then – the "growth" is an illusion.  

Then we take into account the declining purchasing power of those dollars, which also relates to inflation and that's down 35% since 2000.  That means you need $1.6 today to buy whatever you could back in 2000 – including stocks.  Now, look at the P/E Ratio of stocks over the past 10 years
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Non-Farm Friday – Is America Working?

Jobs report today.

In September we added an anemic 194,000 jobs and October is projected to rebound to 450,000  but does it matter?  The S&P 500 is up 100 points (2%) this week and up almost 10% since we got that crappy payroll report last month.  The economic numbers haven't been good and earnings have not been great but, in 19 out of 23 market days since the last NFP Report, the market has gone up and up and up and up.

We're investors, we should be happy.  Our Long-Term Portfolio, which we last reviewed on October 15th, is up $50,000 (10%) for the month – and we only made 3 changes in the last review.  Just sit back and make money is what the market is teaching us but, do you know what that's called?  Complacency!  And complacency is a very dangerous disease for a trade to catch.  The SPY ETF hasn't cracked 100M in volume since October 6th and it's been closer to 50M most days – 50M is the kind of volume we used to see on half day holidays.

When there's very little trading, there is a larger percentage of computer trading as a certain amount of money flows into ETFs every day from payrolls and retirement accounts, which all run on algorithms.  And, of course, if money is coming in and people aren't selling, the algos that run other trading platforms interpret that as a strong market and maintain their own positive bias and, more importantly, they never see a sell signal.  The Fed has pumped another 10% into the money supply this year, pushing us up $2Tn – $2Tn was HALF of the total money supply in 2019 – that's what they added this year – and they wonder where the inflation is coming from:

Wednesday Ramblings – Things that Make You go Hmmmm… | Phil's Stock WorldWhere does this money go?  Well mostly to the Banksters but then they get to multiply that money by 10 and play with it as they see fit.  Some of those Banksters are JPM and GS and they buy a lot of stock with it and they lend money (margin,…
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Fantastic Thursday – Low Rates Forever!

Richard Drew/Associated PressHigher and higher.

Jerome Powell came out if his hole and saw no inflation, so now we have 6 more months of 0% interest rates (at least) for the Banksters.  The markets loved Powell sticking to his story that the inflation that is obvious to every sentient being on this planet is only "transitory" and will go away when the virus goes away so yeah, viruses cause inflation, not the Fed - that's the ticket….  

As noted by the NY Times:  

"Powell repeated his longstanding belief that high inflation was mostly caused by disruptions in global supply networks and other ripple effects of the pandemic — problems that the Fed can’t do much about.

"On interest rates, Mr. Powell rejected the thinking of leaders at several other leading central banks and of a handful of his own colleagues. They think that excess demand in the economy is a big part of the inflation problem and that rate increases would help address it — and that current high inflation could become ingrained in economic decision-making, with long-lasting consequences."

It is a delicate moment. President Biden must decide whether to reappoint Mr. Powell to a second term leading the Fed. High inflation is causing economic discontent for Americans, according to surveys, and helping to drag down the president’s approval ratings. Global bond markets have been gyrating amid uncertainty about whether the era of ultralow interest rates may be coming to an end.

The Bank of Canada, the Reserve Bank of Australia and the Bank of England have all indicated they will be raising rates and several Eastern European Central Banks have already raised rates, with Poland moving to 0.75% on Wednesday – 3 TIMES the rate offered by the Fed.  

Here's an interesting chart from NY Mag which shows the correlation between inflation and concerns about inflation and you'll notice that, unusually, the people are way behind the curve in worrying about inflation, which is unusual.  Now Powell is a people so you could say he's in that crowd but more likely its the endless media messaging from people like Powell that is causing the rest of
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Phil's Favorites

Animal Spirits: The DAO of DeFi Index Funds


Animal Spirits: The DAO of DeFi Index Funds

Courtesy of 

On today’s show we discuss:


Listen here:


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Zero Hedge

Biden To Impose Tighter Travel Restrictions On Foreigners

Courtesy of ZeroHedge View original post here.

Update (0900ET): More reports about the new CDC-recommended travel restrictions have hit on Wednesday as the Biden White House has all but confirmed its plans to impose new restrictions on travel despite the WHO's pleas that South Africa not be penalized for warning the world about the new variant.

To be sure, the restrictions being considered by the administration would still allow travelers with up-to-date COVID testing (within the last 24 hours) to enter the country. Presently, vaccinated travelers must get tested within three days of boarding their fligh...

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Omicron and market sell-off: don't be surprised if there's more turbulence to come


Omicron and market sell-off: don’t be surprised if there’s more turbulence to come


Courtesy of Arturo Bris, International Institute for Management Development (IMD)

Until the Omicron variant hit the headlines, the signs were that 2021 was going to close with a stellar stock-market performance. Most markets have been on the rise since the beginning of the year, with the S&P500 up about 25% and the FTSE All Share index up by about 10%.

There had ...

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The first Thanksgiving is a key chapter in America's origin story - but what happened in Virginia four months later mattered much more


The first Thanksgiving is a key chapter in America’s origin story – but what happened in Virginia four months later mattered much more

In the 19th century, there was a campaign to link the Thanksgiving holiday to the Pilgrims. Bettman/Getty Images

Courtesy of Peter C. Mancall, USC Dornsife College of Letters, Arts and Sciences

This year marks the 400th anniversary of the first Thanksgiving in New England. Remembered and retold as an allegory for perseverance and cooper...

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Chart School

Gold and Silver still working higher

Courtesy of Read the Ticker

Using Gann Angles from zero we can time the next run up, and it is near.

The last two days gold and silver are down on the back of central bankers talking the US Dollar higher in a attempt to off set inflation. A rising dollar is a form of tightening. Also the talk of a faster 'taper' has sent interest rates higher. But Luke Gromen knows this cant not last.

@LukeGromen Externally-financed twin deficit nations with insufficient external financing (ie the US, not Japan) cannot abide rising real rates for long.

RTT Comments: What this means a higher US Dollar makes it harder for those outside the US to buy the vast quantity of US Treasuries. 


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Digital Currencies

Stablecoins: these cryptocurrencies threaten the financial system, but no one is getting to grips with them


Stablecoins: these cryptocurrencies threaten the financial system, but no one is getting to grips with them

Safe as houses? iQoncept

Courtesy of Jean-Philippe Serbera, Sheffield Hallam University

Cryptocurrencies have had an exceptional year, reaching a combined value of more than US$3 trillion (£2.2 trillion) for the first time in November. The market seems to have benefited from the public having tim...

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Phil's Interview on Options Trading with TD Bank

TD Bank's host Bryan Rogers interviewed Phil on June 10 as part of TD's Options Education Month. If you missed the program, be sure to watch the video below. It should be required viewing for anyone trading or thinking about trading using options. 

Watch here:

TD's webinar with Phil (link) or right here at PSW

Screenshots of TD's slides illustrating Phil's examples:




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Kimble Charting Solutions

Crude Oil Cleared For Blast Off On This Dual Breakout?

Courtesy of Chris Kimble

Is Crude Oil about to blast off and hit much higher prices? It might be worth being aware of what could be taking place this month in this important commodity!

Crude Oil has created lower highs over the past 13-years, since peaking back in 2008, along line (1).

It created a “Double Top at (2), then it proceeded to decline more than 60% in four months.

The countertrend rally in Crude Oil has it attempting to break above its 13-year falling resistance as well as its double top at (3).

A successful breakout at (3) would suggest Crude Oil is about to mo...

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Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...

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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt


Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...

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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...

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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House


Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...

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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
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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. Contact Ilene to learn about our affiliate and content sharing programs.