Weakening Wednesday – Powell’s Testimony Doesn’t Really Help
by phil - July 18th, 2018 8:34 am
That's what Robert Reich calls the confusion and bewilderment Americans feel when listening to the President but the same can be said for our New Federal Reserve Chariman, Jerome Powell, who testified before the Senate yesterday and will testify again tomorrow without actually saying anything at all but, like the parable of the blind men feeling an elephant – everyone will be able to draw a conclusion about what he said – even if those conclusions are diametrically opposed to each other.
CNBC says "Powell backs more rate hikes as economy growing "considerably stronger"" while Market Watch says Treasury yeilds are heading lower on doveish testimony and CBS says "Jay Powell shrugs off trade worries, expects rates to keep rising" and Bloomberg says "Powell's 'For Now' Caveat a Sign Fed Rate Hikes Not on Autopilot." So Jerome Powell, like the President, is all things to all people – whatever you want to think he said – he kind of said it.
Is that really what we want in a Fed Chairman? Why is our monetary policy a closely guarded secret? There was, briefly, a movement to make the Fed more transparent and have them set firm tartgets for actions well ahead of time but investment banks can't make money if EVERYONE know what the Fed is going to do – who would they be able to bet against with their inside information?
It doesn't get more inside than Goldman Sachs, of course, who have alumni like Neel Kashkari, Stephen Friedman, Bill Dudly, Patrick Harker and Robert Kaplan. In fact, there are 12 GS Alumni currently on the Fed Board (not to mention Carney heading the Bank of England, and, of course Draghi at the ECB) and Goldman was even fined $50M after one of it's emploees was caught obtaining regulatory documents from former collegues at the NY Fed but don't worry, no one has been caught since! Treasury Secretary Steve Mnuchin is also a former GS partner.
And, of course, a few Trillion Dollars worth of our National Debt (which you and your children owe) was accrued by the Fed (who still have $4.5Tn worth of debt on their balance sheet) bailing out Goldman and other…
Posted in Appears on main page, Immediately available to public | Join Member's Chat - 159 Comments Here »
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Phil is a master at keeping you laughing, as well as making you money. - It is like " laughing all the way to the bank!"
Gel1
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As a fellow "low-end" investor I like Phil's Buy/Write strategy on solid stocks. Before I came here I loved to try to "figure things out" with very little success "TRYING TO FIGURE THINGS OUT"! I traded too much and fell in love with stocks that "should have done" what they didn't do. Now a majority of my accounts are in Buy/Writes suggested here or cash (waiting for a better time for more Buy/Writes). I use 15-20% of my total holding to short term trade and hedge. This is manageable with my full time job as a business owner. I have found Phil's system a more discipline way to achieve the returns I want without relying on my ability (more like inability to "figure things out").
DCalrk41
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Way to go Phil! Have I said how much I appreciate your site lately! Your ability to teach and your willingless to give others a forum to demonstrate their own skill sets makes your site remarkable. I got great help from you, jmm1951, and Iflantheman (special thanks!) today. Hell, if I have many more days like this I may even be able to sign up for a full year rather than doing it just quarterly. Tomorrow is another day but, fabulous job today!
dclark41
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I can't believe it. After 2 Months of reading every post of every section on this site, the light bulb finaly went on. I was begining to think this was beyond me capacity to understand. Thanks Guys. Specifically Phil, Pharm, Cap, Matt. Im still Green as a leprechaun but I pulled the trigger on that SRS Vertical you laid down yesterday Phil. Very Clever. Now if I can just figure how to roll I migh make some money. Thanks for sharing, This community you have here is quite remarkable.
Zucko
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/NKD- Kownichiwa Cowboy!! One week of patience and scaling in and out pays off. This is a testament to Phil's fundamental analysis with the PSW technique. Thanks Phil.
JohnO
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Phil, You were on the $ today with your calls almost exactly on the turns – Krap kuhn krup (Thai for thank you very much).
Jomptien
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Phil- great call in oil this morning! Now that Im no longer studying and am back in the real world I can only check this in the morning, at lunch, and after work. Anyways, you've been killing it on oil ( even more than you usually do) so I made a point to wake up extra early and made .25 off your ‘buy oil if you're brave'recommendation. It's nice to wake up and scalp 100+ bucks before I even start my real job. You lay those golden eggs everyday Phil! I thank you for that!
Jromeha
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Phil - I know I am small change compared to most others members, but I just wanted to let you know that during the last two weeks with the shorts you and others suggested I have 6 winners and 5 losers. My losers were small because I tried to follow your guidelines as best I could. On the other hand my winners on average were around 50%. Consequently, I am up $2000 in 14 days. Thank you for your patience and help. I think I am making progress getting rid of some of my poor trading habits of the past!
DCalrk41
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Phil, I don't know how I can thank you enough for your guidance this past week. I'm up significantly in my portfolio and I've never been so relaxed watching the market panic. Thanks once again for being here for us.
thechaser
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Best day ever trading the futures, thanks to Phil's excellent call this am, and his "play the laggard" instruction. Well done Phil!
Deano
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Personally I admire and respect you disciplined approach to investing. My style is at the extreme side of aggressive and I have to learn how to be less that way. If I yell " Let it Ride" at my house, no one says a word so I can't use that to temper my behavior. Phil has done a pretty good job of knocking some of my potential moves and as a result, I have increased my portfolio value by almost 25% since late July.
DoubleD
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Once again, many muchos for the SODA trade of last week. Finally out of all three legs. I didn't want to wait for expiration tomorrow and the possible peg at $70.00, following your dictum to not get greedy.
flipspiceland
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Don't expect to get rich quick here, but you can get easy 30 - 50 % per year, just by buying good stocks at discount (as we often discuss), selling monthly premiums of calls and puts.
Tchayipov
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Thanks, Phil!!! I just crushed today with it with silver (SLV) calls today, thanks to your persistent reminders of how ridiculously cheap it has become, and watching my TSLA this week $240 puts dissolve into chump change added an extra note of amusement.
Zeroxzero
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GIVE THANKS/PHIL Have not done my 10,000 hours, but a couple of years at PSW, and moved from fishing with a single line to owner of a commercial trawler (metaphorically speaking). Now I fish with many lines. It is amazing when you go over the same information time and time again, eventually it clicks. Like planting trees; being the house, 20% sale items, selling into the excitement. and patience. I just sold an AAPL Jan 12 340/390 BCS financed by the sales of Jan 12 275 Put. The trade was put on one year ago for a net credit and exited five minutes ago for a 49 dollar per contract profit. No point in waiting till opex to see what happens, and I will just sell 10 of those VLO puts to make myself net the round 50. I no longer worry about opex coming as I have adjusted well in time for most positions that go against me. I still make some howlers (RIMM, TBT, TRGT) but I play the percentages and my winners outdistance my losers by many miles. I would never be in this position if it were not for Phil. He is a treasure, pure and simple. The goose that lays the golden egg if we care to listen and practice. Phil, a mighty big thank you.
Winston
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Phil fantastic call on the markets… I owe you BIG…thanks and have a great weekend!
Kustomz
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Oxen (directly) and Wilkinson (indirectly) are making me a great day trader! Props to Andrew for another little nugget last night: HIG. $20 Dec calls paid 6% quickly this morning. And helloooo STJ - a few days, but nice pick nonetheless - esp with early cover premium.
Dstillwe
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Phil, did you by chance publish the weekly webinar on Youtube yet? I have been watching these and they are awesome. Unfortunately, I can't cut out of work to attend live webinars. Again, they are just awesome content – thank you.
jcpdx
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Phil/Everyone here/Thank you - What everyone here with their insightful comments (including yourself) has helped me with is that I'm greatly increasing my ability to trade more psychologically neutral, although I've got a ways to go. Two years ago I'd wake up early and my heart would race if futures weren't pointing exactly how I wanted… I've noticed an exponential leap in my discipline skills especially over this past two weeks. The old me would have ran with that trade for profits without even asking. Now I know that there are ALWAYS more trades and that I have PLENTY of options to turn a bad trade even. Also, it's more logical and less emotionally draining which lets me focus my faculties on my wife, college, my job, and studying for the ol' Series 7. Would it be safe to say that one of the most important skills to develop is the ability to adjust? I'd love to get to the point where I can look at a bracket and know, for example, what I need to sell for cover in what month in order to get my desired results. Both COF and my past DMM venture have been excellent learning experiences. Thanks, everyone. I look forward to further lessons.
Skasiah
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Phil is a fundamentalist to his fingertips. His ability to value a stock goes well beyond p/e, as he understands the essence of many businesses, what gives them value and how they make their money. As such, his recommendations are invaluable to a investor who takes a value-oriented approach.
Zeroxzero
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New member/1st time posting: Thanks Phil and Pharm for the rec on TOS. I've emailed Scott to get myself setup so I hope to hear back soon. As a newbie on PSW for a month now, I've been readin' and readin' and readin'. Gonna start paper-trading for a while. See how I do before putting a single dime into it. New at options but seems like this is the best training and educational platform out there. I'm a long-time mortgage broker who got too involved with real estate investing. LOVED your article, Phil, on mortgage interest scams. Right on!! Let me know if and how I can contribute back to the community here. Cheers! - Mark
Mark
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Phil – BTW, the new STP/LTP coupled with the income portfolio is Perfect! I do not trade all of them, very few actually since I work during market hours. However, following the trades real-time is very educational. I did enter the ABX call if you recall, I rolled to July on that nonsense news that sent it tumbling. Out today for 110% gain (2.00 stop) not counting covering the loss from the earlier roll. Nonetheless, a good trade. Keep it up…. Thanks
JFawcett
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Phil - Thanks for the welcoming gift of the POT at a buck Just paid for this month and my membership is not even 24 hours old! looking forward to many more - bk
Bjkeck
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The best play I made this year was PSW. Will renew my membership tonight. Looking for the same trading profit percentages next year, but will have an advantage from the compounding, and much better skills acquired from you and the many skilled PSW co-pilots. Thanks!
Gel1
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100KP dividend plays - FYI, I'm loving them...thanks, Phil!!! Including the $0.848/share dividend, I am up 100% on my $2.38 net entry on LYG...that's pretty cool!
SSDirk
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Thanks Phil, I have adjusted my position by getting rid of the IYF puts, and selling the FAZ puts. You have so many of these awesome little tricks in your playbook that it really amazes me. I toally love your analogy by the way: Do you want insurance that you have to pay for, or do you want insurance that pays you?
Craigzooka
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This is my first month here. Today was a money train with futures. I gained 7500 USD with KC, RB, CL, NG. I took RB almost every direction up and down. And I only used 1 contract or maximum 2. Thank you. I think it was a good investment to subscribe…
Kgabor
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WOW, look at DRYS go. Nice call on the entry the other week Phil. I got 200 at $6.66 and sold a 7.5 call for $.50, then on the tear today sold another 7.5 call for $1. This should puts me in at an average of $5.91 and called away at $7.5 for a profit of $300+ after commisions. Once again another Phil trade pays for this months membership.
Craigzooka
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AMZN ... thanks Phil; boy did they run a squeeze on everyone there ... made me sweat ... scaling helped! I think AMZN has an 85 handle tomorrow ... maybe lower.
Cap
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USO, QQQ- Phil, thanks for these plays. Out of USO for about 65% gain today and just keeping 1/4 QQQ.
Ksone88
The Flattening
by ilene - July 18th, 2018 5:13 am
The Flattening
Courtesy of Michael Batnick
There’s been a ton of talk lately about the flattening yield curve. I don’t really have anything insightful to add to the conversation, but I do want to share some of the best charts I’ve seen on the topic.
First, why is the curve inverting, via Tim Duy.
Last week the interest rate spread between ten- and two-year Treasuries narrowed to a cycle low of 25 basis points. Such narrowing is a typical characteristic of a tightening cycle as short-term rates respond more quickly to monetary policy moves than long-term rates. This cycle has been no different. Despite tighter policy, an economy near full employment, quantitative tightening as the Fed reduces the balance sheet, and a fiscal budget situation that promises to deliver massive new bond supply, the long end of the yield curve remains locked to roughly three percent.
Charlie Bilello has done some great work on this topic. Each of the last nine yield curve inversions were followed by a recession. However, the lead time was anywhere from 8 to 24 months, with an average of 14 months.
This time, like all other times, is a little bit different. What makes today unique is where the fed funds rate could be at inversion. The average during the last nine inversions was 6.16%. Today, while not yet inverted, we’re at 2%.
The economy is not the stock market, so how much information can we get about the stocks from an inverted yield curve? Again, here’s a table from Charlie which shows that while an inverted curve has meant trouble for the economy and for stocks, there was an average of 8 months time between the inversion and the stock market peak.
Finally, this chart from @oddstats shows the next 500 days for stocks when the yield curve was flattening to where it is today. You can see that stocks have performed rather well over the next two years.
ARE YOU OR SOMEONE YOU KNOW BE BULLIED INTO BELIEVING THE YIELD CURVE IS CURRENTLY BEARISH FOR
…
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Microprocessor designers realize security must be a primary concern
by ilene - July 18th, 2018 4:24 am
Microprocessor designers realize security must be a primary concern
Are microchips as secure as you think they should be? Yevhenii Kuchynskyi/Shutterstock.com
Courtesy of Mark Hempstead, Tufts University
Computers’ amazing abilities to entertain people, help them work, and even respond to voice commands are, at their heart, the results of decades of technological development and innovation in microprocessor design. Under constant pressure to extract more computing performance from smaller and more energy-efficient components, chip architects have invented a dizzying array of tricks and gadgets that make computers faster. But 50 years after the founding of Intel, engineers have begun to second-guess many of the chip-making industry’s design techniques.
Recently, security researchers have found that some innovations have let secrets flow freely out of computer hardware the same way software vulnerabilities have led to cyberattacks and data breaches. The best known recent examples were the chip flaws nicknamed Spectre and Meltdown that affected billions of computers, smartphones and other electronic devices. On July 10, researchers announced they discovered new variants of those flaws exploiting the same fundamental leaks in the majority of microprocessors manufactured within the last 20 years.
This realization has led to calls from microchip industry leaders, including icons John Hennessy and David Patterson, for a complete rethinking of computer architecture to put security first. I have been a researcher in the computer architecture field for 15 years – as a graduate student and professor, with stints in industry research organizations – and conduct research in power-management, microarchitecture and security. It’s not the first time designers have had to reevaluate everything they were doing. However, this awakening requires a faster and more significant change to restore users’ trust in hardware security without ruining devices’ performance and battery life.
Not so secure
A single modern microprocessor chip can have more than a billion tiny components, including transistors and switches, that form their own little network on a piece of silicon deep inside a computer or electronic gadget. The main problem stems from the fact that tidbits of useful information can leak out from one component to others nearby, just like neighbors often know what’s going on in…
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$2,000 Tuesday – Netflix Earnings Give Us a Big Win on Nasdaq Shorts
by phil - July 17th, 2018 8:26 am
Wheeeee!
That's the way to play earnings! In yesterday's Morning Report we called for shorting the Nasdaq (/NQ) Futures at the 7,400 line in hopes that Netflix (NFLX) would disappoint and take down the index and that's exactly what happened. Nasdaq Futures contracts pay $20 per point so the 100-point drop paid $2,000 for each short contract – not bad for a day's work and, of course, our other index contracts were also winners:
- S&P (/ES) short at 2,800 fell to 2,792 is just 8 points at $50 per point for gains of $400 per contract.
- Dow (/YM) short at 25,000 fell to 24,960 and 40 points at $5 per contract gained $200 per contract
- Russell (/RTY) short at 1,690 fell to 1,675 and 15 points at $50 per point was a gain of $750 per contract.
And, of course, our Netflix (NFLX) short play will be doing very well this morning as that stock dropped $50 (12.5%) on disappointing subscriber growth and we could see that coming a mile away as no stock is likely to justify 250x earnings – even in the best conditions and we simply didn't see the current economic conditions (rising oil prices, economic slowdown, political turmoil) as a good recipe for continued super-bullishness on NFLX.
There is, however, still time to initiate our bullish earnings trade on Sketchers (SKX) as detailed in yesterday's Report. That stock finished right at $31.07, down 0.22 for the day despite our bullish pick – but what do we know? Speaking of what we know, my comments were featured in Investing.com's weekly commodity outlook and that led to yet another $2,000 per contract day's gain on Oil (/CL) Futures shorts at the $70 line – which is a follow-through from our $5,000 per contract gain from our original call to short oil at $75 on July 3rd (nailed it!).
Though we have a longer-term target of $65, we're now using our Ultra-Short Oil ETF (SCO) play to cover that, not the Futures. Our goal in the futures, as noted…
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Tech stocks contributed 98% of the S&P 500′s 2018 gain
by ilene - July 17th, 2018 2:57 am
Tech stocks contributed 98% of the S&P 500’s 2018 gain
Courtesy of Joshua M Brown
The S&P 500 is up 2.6% year to date through the first half and technology stocks have contributed approximately all 2.6% of it.
Just a few large tech stocks in particular.
Savita’s equity and quant group relays the following:
Only three sectors outperformed in the first half On a total return basis, Discretionary +11.5%, Tech +10.9% and Energy +6.8% beat the market. Energy was 2Q’s best-performing sector (+13.5%) after turning amongst the worst returns in 1Q. Tech was the single-biggest contributor to the S&P 500’s 1H gain, contributing 98% of the S&P 500’s total return. Excluding FAANG, the total return would have been negative (-0.7%) in the 1H. Staples (-8.6%) and Telco (-8.4%) were the worst.
and a pair of charts illustrating this:
Josh here – Now, of course, every bull market has its leadership stocks. This one is no different, albeit the concentration at the top is fairly high because of the sheer size of the companies’ market caps we’re talking about.
But another leadership area thus far has been the small caps – the Russell has made new highs repeatedly, owing to an investor preference in US-focused domestic stories and the continued strength of the dollar this year.
So there’s more going on here, it’s just been tremendously overshadowed.
Source:
1H18: good micro, bad macro
Bank of America Merrill Lynch – July 16th, 2018
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Monday Market Movement – Trump has his First Debriefing
by phil - July 16th, 2018 7:57 am
President Trump is meeting his handler this morning.
It's a private meeting, of course, and whatever goes on from there we will only know from what Trump and Putin say about it but, fortunately, both men are well-known for giving the public faithful accounts of their actions behind closed doors, right? According to protocols, however, Putin at least should have a report and maybe one day we'll get to see it.
Futile though it's been, we're taking another whack at shorting the Futures this morning as noted in my 7:21 note to our Members:
On the whole, I still like the short side and we'll be looking to cash a lot of positions in our portfolio reviews. /NQ below 7,400 (tight stops above for all) is good as is, /YM 25,000, /ES 2,800 and /RTY 1,690 – 3 below and short the laggard is the safest way to play but I'm hoping NFLX disappoints and hurts the Nasdaq and, of course, it's time for negative AAPL rumors!
Powell testifies before Congress for the first time tomorrow – that's a biggie. June Retail Sales this morning, Industrial Production tomorrow, Housing Wednesday and the Beige Book and NY and Philly Feds this week too! So plenty of data to chew over.
| TIME (ET) | REPORT | PERIOD | ACTUAL | FORECAST | PREVIOUS |
|---|---|---|---|---|---|
| MONDAY, JULY 16 | |||||
| 8:30 am | Retail sales | June | 0.5% | 0.8% | |
| 8:30 am | Retail sales ex-autos | June | 0.3% | 0.9% | |
| 8:30 am | Empire state index | July | -- | 25.0 | |
| 10 am | Business inventories | May | -- | 0.3% | |
| TUESDAY, JULY 17 | |||||
| 9:15 am | Industrial production | June | 0.6% | -0.1% | |
| 9:15 am | Capacity utilization | June | 78.3% | 77.9% | |
…
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site
