Philstockworld April Top Trade Review

Image result for top trade ideasYes, this is Monday morning's Report.

I don't have much to say about the markets, they are back near the highs and we'll see if they hold tomorrow, not today, as it's Monday and Monday's don't matter.  What we do need to do is bargain-hunt in case it is a real rally and the best way to do that is to look back on past trade ideas and see if we can find some that haven't gone up yet.  

We did our last Top Trade Review in Marchso it's a good time to do one of those and, as our Members well know, the vast majority of those trades turn positive so, when they're not, it's usually just a matter of time.  As of the March review, we had looked at Top Trades that were initiated through July and, out of 32 trade ideas in 30 weeks, we had 24 winners and 8 losers but 2 of the winners turned around by Sept and that left is with 26 wins and 6 losses for a very solid 86.67% winning percentatge.

Our Top Trades are what we think are our best trade ideas of the week with the highest chances of winning and we send out Alerts to our Members via Text and Email but we don't have a specific portfolio for them as they ofen ended up in one of our 5 various Member Portfolios already.  

There's a bit of randomness to the reviews in that we check in on trades after roughly 6 months so they are usually in progress and may be randomly up or down at the moment but that's why these reviews are so great for identifying bargains that simply haven't made a move yet.  These are the Top Trade Ideas for August and September:

Tuesday, Aug 1st: Teva (TEVA) – We felt TEVA has bottomed out in early Aug but we were wrong and it did go a lot lower before bouncing back.  Our trade idea was:

As a new


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TGI Friday the 13th – Bulls are Feeling Lucky

We're still waiting on a few of bounce lines:

  • Dow 23,800 (weak) and 24,200 (strong)
  • S&P 2,640 (weak) and 2,684 (strong)
  • Nasdaq 6,500 (weak) and 6,700 (strong)
  • NYSE 12,450 (weak) and 12,600 (strong)
  • Russell 1,520 (weak) and 1,540 (strong)

Even with this morning's pre-market rally, we still have to take the same 3 red levels we were looking for yesterday so we'll have to remain well-hedged into the weekend because we don't change our stance until at least 3 of five of the Strong Bounce levels are captured AND HELD – for at least one full day after a close above.

As you can see on the chart, 2,693 is the 50-day moving average on the S&P 500 so that's the real goal as it needs to be over that line to avoid (or at least put off) forming a "death cross" below the 200 dma into July earnings.  Remember, we predicted strong bank earnings in our Big Bank Theory Report last Thursday and our Trade Idea for Citigroup (C) is looking very good as they have already jumped $4 since we made the play:

The markets are generally back to bullish as Trump walks back threats against Syria and, more importantly, says he may want to put us back in the Trans Pacific Partnership (…
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Thrilling Thursday – Quick Gains Made Shorting Oil and Gasoline as OPEC Loses Control

Wheeee! 

As you can see from the chart, we made just under $2,500 shorting Gasoline (/RB) futures into yesterday's run-up after inventories.  We also picked up $1,560 on our oil shorts so all is very, very well this morning despite a slow week trading futures (it's generally been too crazy to risk). 

Things are still risky but we had a net build in EIA inventories yesterday so the Fundamentals were bearish and oil spiked up on Syria fears but Syria themselves are not big suppliers of oil and the real news is OPEC, for the 5th time this year, being forced to admit the rest of the World is simply filling the gap of their production cuts (now 1.8Mb/d) with overall Global Supply UP 180,000 barrels a day led by the US adding 1.5Mb/d – mainly from shale production.  

There's simply no Fundamental reason for oil to be over $65 so, yesterday, when we got that silly spike up on oil after the weak Inventory Report, I said to our Members:

Wow, that was a crazy reverse on /CL.  I'm back short at $67.45 with a stop over $67.50 – I dare them!  /RB too at $2.075 – ridiculous!  

As you can see, $67.45 turned out to be the dead to – perhaps BECAUSE we called it but we'll take the win either way and we'll certainly take the $1,560 profit!  This morning we stopped out back over $66.50 but we're happy to go back short on /CL below that line with tight stops above.   The Dollar is back over $89.50 and, as long as we hold that line – I'll be liking the oil short but we should be thrilled to take $500/contract gains at $66 as it's still almost the weekend – which is a very dangerous time to be shorting oil.

If you are Futures-challenged and want to make a longer-term play against oil prices, the Ultra-Short ETF (SCO) is down at $18.78 and we can play to get out before the May Holiday weekend with the May (18th) $18 ($1.70)/$20 (0.85) bull call spread at 0.85 on the $2 spread so upside potential of $1.15 (135%) but I'd be thrilled to take a quick 0.40 (47%) off the table, as that's a very nice short-term gain.

 

 

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What Now Wednesday – Trump’s Manic Tweets Cost Markets Half Their Gains

He's at it again.

In a tweet that was so bad at 7am that they have already pulled it by 8, Trump pushes the Nuclear Clock to 11:59:59.9 by threatening Syria and Russia with missile strikes.  Remember when Trump said you shouldn't tell your enemies your plans in advance?  Too bad he didn't stick to that. 

The tweet may be gone but the damage is done and the Futures have already given back half of yesterday's silly gains and it's going to be a busy data day with Fed Minutes at 2pm (which was going to bring down the markets anyway) but CPI is coming right up and Atlanta Fed is at 10, EIA at 10:30, a 10-year note auction at 1pm (we're borrowing $21Bn this week) and Bed Bath and Beyond earnings after the close, which I think will be very telling.

Of course, Trump can't stay mad at his Putie for too long and his last tweet (so far) has offered to reconcile by offering to "help with their (Russia's) economy" and "stop the arms race" Trump just started by cliaming to have "nice, new and smart" missiles.  

As noted by Bloomberg, A strike that hits Russian assets in Syria — even if unintentionally — could result in a dangerous game of one-upmanship, potentially dragging the U.S. further into a conflict the president wants to leave. Oil prices rose after Trump’s remarks, while U.S. stock futures fell and the Russian ruble slumped to the lowest level in 16 months.  Russia has already strengthened Syria’s air-defense capabilities, deploying S-400 missile batteries after U.S. strikes a year ago hit a Syrian base.

Image result for trump putin nuclearThe most important thing about a U.S. strike is the potential for Russian casualties as a result of any military activity there,” said Ayham Kamel, head of Middle East and North Africa research at Eurasia Group. “That is where there’s a risk of an escalatory cycle that would be much more meaningful than attacking Assad’s forces.”  In March, Valery Gerasimov, chief of Russia’s General Staff, already warned the US that “in the event a threat arises to the lives of our servicemen, the Armed Forces of Russia will take retaliatory measures
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Trade Won Tuesday – China Gives Up, Trump Wins – America is Great!

What total insanity!  

Now China's Xi gave a speech last night promising foreign companies greater access to China’s financial and manufacturing sectors, pledging Beijing’s commitment to further economic liberalization.  In a speech that officials had billed as a major address, Mr. Xi said Tuesday that plans are under way to accelerate access to the insurance sector, expand the permitted business scope for foreign financial institutions and reduce tariffs on imported automobiles and ownership limits for foreign car companies.

Though these were vague statements, the markets instantly reacted as if the Trade War ended and we flew back to the highs that we lost yesterday afternoon (still not strong bounces).  There's nothing really to do but sit back and see what sticks but, far from a victory for Trump, Xi took the time to criticize the US President and his policies.  As noted in the Wall Street Journal:

“In a world aspiring for peace and development, the Cold War and zero-sum mentality look even more out of place.” Mr. Xi told the Boao Forum, a government-backed gathering of business and political leaders on the tropical island of Hainan.

“Putting oneself on a pedestal or trying to immunize oneself from adverse developments will get nowhere,” he said.

Many of the initiatives Mr. Xi offered up have been previously proposed. That, along with the lack of definite schedules for action, drew some skeptical reviews from foreign business executives and Chinese researchers alike.  “We have every intention to translate the measures into reality sooner rather than later,” Mr. Xi said, though he didn’t provide a clearer timetable for those or the other measures announced.

Image result for trump trade xi cartoonIf Trump is smart (debateable), he'll thank Xi and move on – WITHOUT declaring victory.  Only by stressing cooperation can we back off the cliff of this Trade War but, of course, the cooperation Xi envisions is essentially Globalization – the very thing the Trump Administration and their
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Monday Market Movement – Trade Wars and Earnings

Don't get fooled by a bounce.

Team Trump softened their tone over the weekend, leading Asian stocks to move back up and Europe opened up over half a percent and our Futures are up half a percent but now Trump has undone the weekend's diplomacy with this morning's tweet calling China "STUPID TRADE" that has been "going on for years."  Hey, maybe it is a brilliant negotiating strategy where the President ACTS like an out-of-control lunatic so the Chinese will submit to "reasonable" requests from his underlings.  Or maybe he's just insane or maybe he's a Russian agent working to undermine 50 years of relationship-building between the US and China?

Meanwhile, we'll be watching the S&P closely, especially around our 2,640 line to see if it holds tomorrow (today is meaningless) and we'll be looking for the same bounce lines we were looking for last week (and all of March), which are:

Dow 23,800 (weak) and 24,200 (strong)

 

 

 

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Trade War Friday – Game on Again as Trump Throws Speech Out

Holy cow!  

Things are just getting nuts now.  Trump declares unilateral trade war on China, China retaliates, White House says "just kidding" and then Trump says "not kidding" and TRIPLES the tariffs by adding $100Bn more and then he literally tosses out his prepared speech as it would be "too boring" and then began ranting about immigrants, claiming they illegally voted against him and that women are being raped by them "at levels that nobody has ever seen before – THEY don't want to mention that."

The only thing we can count on these days is chaos and God bless it because we're having THE best time trading it!  In our Live Chat Room yesterday, when the White House was busy walking back Trump's earlier comments on trade, I said to our Members:

Watch out for any of the levels that are now Green (or black) to turn red – that's a good sign to short the indexes.  6,650 on /NQ is a good line and it's lined up with 24,350, 2,660 and 1,540.

That was our only official play of the day but it was good for profits of $3,000 per contract so, no need for more, right?  We knew 6,650 was going to be resistance (between our weak and strong bounces) and, of course, we also knew Trump was going to continue to attack Amazon (AMZN) and that casts a shadow on the whole tech sector because – if the President of the US can harrass one tech company – what's to stop him from going after others and, with that precident set – what's to stop every World Leader from going after their political business enemies like Trump does?

America used to lead by example and God help us all if the rest of the World begins to follow our current example!

As noted by Joe Scarborough on MSNBC: "Lies about [Amazon], causes its stock to go down. I’ve watched enough episodes of Billions to know that if you’ve spread lies about a
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Retaliation Wednesday – The Empire Strikes Back!

Image result for us china tariffsTariffs! 

China hit back last night with $50Bn in tariffs against US exports like cars, chemicals and soy beans along with 106 categories of American goods that are exported into China and, more specifically, goods that are exported from Republican-dominated states, where lawmakers might be expected to have some influence with President Trump, presumably to get him to back down from the latest trade demands.

"China has never succumed to external pressure – external pressure will only make the Chinese people more focused on economic development.  China's attitude is clear, we don't want a trade war because a trade war would hurt the interests of both countries.  As the Chinese saying goes, it is only polite to reciprocate." – Trade Minister Zhu.  

Image result for us china tariffsOnly polite to reciprocate” is unusually dark and direct. Unlike the U.S. president, who salts his speech with off-the-cuff remarks about foreign policy, Chinese officials don’t usually digress with clever comments.  Trump has undone years of hard-fought civility in discourse that was meant to avoid exactly the kind of economic catastrophe he is now causing.

Wei Jianguo, a former vice minister of commerce, said the key to understanding China’s response is “same proportion, same scale and same intensity.  That means we will retaliate with the same strength,” he said. “Whatever the total value of trade the United States targets, we will target the same amount. If it’s in the form of tariffs, we will do the same.”

The escalated Chinese response is exactly what we predicted for our Members.  In fact, last Tuesday (3/27), right in our Morning Report, I said:

The markets are back up to our weak bounce lines(see yesterday's reportthough I think we'll be using them as shorting lines this morning as the Dollar is recovering quickly, up 0.6% and that's bound to put a bit of pressure on the markets as they finally hit some resistance.  Dow (/YM) 24,350 is my favorite short at the moment, with tight stops


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Technical Tuesday – Testing the 200 DMA’s

chartWheee – what fun! 

Up 500, down 500 – what volatility?  Yesterday the Volatility Index (VIX) did hit 25 and that's great for us as we get good money for the options we like to sell.  We're generally just amused when the market collapses as we have great hedges, like the one we posted in Thursday morning's PSW Report:

As an additional hedge, at the moment, I like for the STP:

  • Sell 4 WHR 2020 $125 puts for $12.50 ($5,000)
  • Buy 50 SQQQ May $16 calls for $3.90 ($19,500) 
  • Sell 50 SQQQ May $20 calls for $2.20 ($11,000) 

That's net $3,500 on the $20,000 spread that's almost all in the money to start and the only way to lose is if the Nas goes up quite a bit from here which, with all these headwinds, doesn't seem too likely.

The WHR short puts are still $12.50 but the $1.70 spread hit $3 for a gain of $1.30 x 5,000 units for $6,500 (185%) gained in 2 trading days – you're welcome!  Remember, I can only tell you what is likely to happen and how to make money trading it – the rest is up to you.

In our Live Member Chat Room we already cashed in the long calls ($4.50) and left the short calls which are covered by another hedge we already had.  That pulled $22,500 off the table – more than the maximum we expected to make on the trade but now we have to deal with the short calls so we're hoping for a bounce in the Nasdaq as we test the 200-day moving averages.  

 

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Monday Market Mayhem – China Fires Back in Trade Wars, Trump Tells Dreamers to Stop Dreaming

Well, we survived the Space Debris at least.

Unfortunatley for 800,000 children who live in America, they are not surviving President Trump, who is calling for "Caravans" to come and take them away, without the due process or constitutional rights afforded to the other children in their classrooms.  John Oliver handled the sickness of this mess very well over the weekend so you'll either care about this or you won't but, even if you do - what can you do to stop this man?  

 

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