Entries by Phil

Tariffic Tuesday – Markets Bounce Back – Again

What a month this has been! 

It's all over now because Monday is a holiday and EVERYONE (who matters) is out the door early on Friday or Thursday or Wednesday for that matter and they don't come back until next Tuesday or Wednesday or, if they do – they sure aren't working much.  While Americans complain that they don't get many holidays – they certainly seem to stretch the ones they do have out quite a bit

I said we shouldn't expect much volume and yesterday's SPY volume was 60% of Friday's and I think we'll see even lower transaction numbers as the week goes on.  In other words, the whole thing is a joke – you may as well take the week off.  Our picks from yesterday morning were no joke as the Nasdaq (/NQ) Futures popped back to 7,450 this morning for a lovely $1,000 per contract gain from the long play we discussed in Monday Monring's PSW Report.  Likewise the S&P Futures (/ES) gained 10 points at 2,860 (again) and that was good for $500 per contract – not a bad way to start our trading week.  

This morning we're playing JULY Gasoline (/RBN19) Futures at $1.99 and I'll be very surprised if we're not at $2.05 by Thursday and, at $420 per penny, per contract, that could be good for $2,520 per contract – good enough to barbeque some steaks instead of hot dogs this weekend.  A stop below the $198 line limits the risk to $420.  

This weekend is the start of "Summer Driving Season" and the EIA forecasts a slight increase in consumption vs. last year, despite a 1% increase in overall fuel efficiency for the motor vehicle fleet:

For summer 2019, EIA forecasts U.S. motor gasoline consumption will average 9.54 million barrels per day (b/d), up 29,000 b/d (0.3%) compared with last summer’s level and nearly the same as the record summer average set in 2017. Highway travel is forecast to be 1.3% higher than last summer. The forecast increase in highway travel is largely because of growth in employment and population. The effect of the increase in highway travel is forecast to be partially offset by a 1.0%


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Monday Market Madness – Trade Worries Continue to Weigh Down Markets

And down we go again!

Don't worry, it's not only Monday but it's a pre-holiday week so the volume is likely to be low and it's hard to break out of a range on low volume – even to the downside.  That means we kind of like playing 7,400 on the Nasdaq (/NQ) Futures for a bounce – with tight stops below tha line.  The S&P (/ES) Futures are also playable if they get back over 2,850 (now 2,845) with very tight stops below that line as /ES is $50 per point, per contract – so we don't want to mess around.  

The Nasdaq bottomed out at 7,300 on the 13th and the S&P was 2,800 with the Dow (/YM) 25,200 and the Russell (/RTY) 1,520 so, if we fail to hold our lines this morning – that's the next place we'll take a stand but the Russell is already down at 1,527 and looking a bit shakey – so be very careful this morning. 

We did get a nice pop this morning on Natural Gas, which was our long idea from Wednesday's Live Trading Webinar and we're already up over $500 so that's now our stop line but hopefully $2.75(ish) will hold and we'll leg up further but congrats to all who played along with that one on the quick winner.

We also, of course, blew through our hoped-for 25-point drop on the Nasdaq (/NQ) as we're now down over 100 points from our Webinar short and that one is good for $20 per point, per contract so $2,000+ on that short and that's why we love the Futures – it's a great, quick way to hedge your portfolio that quickly returns the cash you need to adjust your bullish positions – like we did last week in our Portfolio Reviews.  

Speaking of the Portfolio Reviews, I want everyone to keep in mind that I have been saying for the past month that we are only staying in our portfolio positions to demonstrate how to trade through a downturn in the market and we ABSOLUTELY would have cashed out any portfolio that mattered to our long-term financial future. 

We are very


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Faltering Friday – Markets Give Up Half the “Rally” on No News

The markets are very moody

Just when we got the S&P back to our 10% line, we're down 20 points this morning and back below the 50-day moving average (2,866), back at the 2,860 line that marks the bottom of our 5% correction zone on the bounce charts we've been using all week.  It's a very disappointing setback and, if this is how we're going to go into the weekend – we are going to need more hedges!  

At the moment (7:30), however, the 5% Rule's™ Bounce Chart™ looks like this:

  • Dow 25,200 is the 5% line and the bounce lines are 25,450 (weak) and 25,700 (strong)  
  • S&P 2,860 is the 5% line and the bounce lines are 2,875 (weak) and 2,890 (strong)
  • Nasdaq 7,475 is the 5% line and the bounce lines are 7,540 (weak) and 7,605 (strong) 
  • Russell 1,550 is the 5% line and the bounce lines are 1,565 (weak) and 1,580 (strong)

We were all red except the Dow (which was at the weak bounce line) on Tuesday morning so this is still progress, but just yesterday afternoon  we only had 3 red boxes left to capture and we would have been back to bullish.  That's what's useful about the Bounce Chart – it keeps you from making bad decisions by making sure the rally is real before…
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The PhilStockWorld.com May Money Talk Portfolio Review

Are we weathering the storm?

So far, not so bad as we're down $14,755 from our April Review, when the overall market was 5% higher.  Options tend to be very volatile, of course and the Volatility Index (VIX) is higher now, which inflates the asking price of the options we sold.  This doesn't matter as long as we're not buying them back at the moment, but it can make our balances look ugly.  

Not that being up 125.8% is "ugly", of course, but we were up 155.3% and it sucks to backslide.  Another problem we have at the moment is our hedges certainly don't kick in on a 5% market drop – so they are not helping but, since I can only adjust this portfolio when I'm live on BNN's Money Talk (here's the April show), I needed hedges that would keep us safe all the way into July, which will be the next time I'm on the show (once a quarter it becomes the Phil Show).

Since our longs were on track to make $83,104 in a flat to slightly down market – we don't mind losing a bit of money on our hedges to take us through a rough quarter – like this one.  As I said on the show, we expected at least a minor correction but there's a fear of missing out (FOMO) as this portfolio was only at $88,922 on Feb 15th, so of course we were going to give back some of those ridiculous gains – but that doesn't invalidate our long-term positions, so we choose to ride out the rough spots.  

As FUNDAMENTAL VALUE INVESTORS we believe that stocks – even the ones we like – can be too expensive, as well as too cheap.  When they are too cheap, we buy them – when they are too expensive, we sell them.  It sounds logical but how many traders actually do it when the time comes?  Unfortunately, we can't make adjustments until July but we can certainly check in our our positions – so let's do that.

  • Nasdaq Ultra-Short ETF (SQQQ) - A hedge we


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Will We Hold It Wednesday – Weak Bounce Edition

This is not pretty.

We're down in the Futures and pretty much back where we were at Monday's close – a bit higher but, more importantly, failing our weak bounce lines 2 days after the drop and that's generally a sign that we're consolidating for a move lower – not recovering.  

I mentioned last week that there's nothing the Russell could do to avoid a "death cross", where the 50-day moving average crosses below the 200-day moving average and that's a bearish sign and, as of this morning, the 50 dma is 1,562 and that's now below the 200 dma at 1,561 and that's 1 point away from a Death Cross! 

Since the 50 dma moves 4x faster than the 200 dma, all it will take is a single down day on the Russell to trigger this extremely bearish technical indicator and that will then trigger selling programs that will affect all the indexes so hedging with the Russell (which we do) is a pretty good idea at the moment – especially as it was down at 1,266 in December and that's 272 points (17.6%) down from here and that would pay $13,600 per contract on the /RTY Futures OR, you could play  the Ultra-Short Russell ETF (TZA) like we are in our Short-Term Portfolio with the following spread:

TZA Short Put 2020 17-JAN 10.00 PUT [TZA @ $9.66 $0.00] -40 8/29/2018 (247) $-13,000 $3.25


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What Trade War Tuesday – Markets Fuggedaboutit Already

MAD About the Trump EraWhat, us worry?  

1, 2, 3, 4 Trump declared a trade war and then announced he's going to have fun in the sun at the G20 with his pal Putin but also plans to see China's President Xi in late June and force him to accept US terms of face SEVERE CONSEQUENCES.  This is the mindset of a 75 year-old racist schmuck who has a 1950s view of China and thinks we just won WWII and get to dictate terms to all the inferior races – not the rational strategy of a United States President!  

Nonetheless, the markets love it when Trump lies to them and we're up almost 200 points pre-market after being down 600 points yesterday so YAY!!!, I guess…

If you remember, way back on Friday morning, in our PSW Report, I told you "it's more likely we're consolidating for a move down" and we put up our anticipated levels, which all failed yesterday but we don't count Mondays (and the volume wasn't very strong either) so TODAY is the day that matters and I'm going to highlight the pre-market (7:30) positions so we can see where we are:

  • Dow 25,200 is the 5% line and the bounce lines are 25,450 (weak) and 25,700 (strong) 

 

  • S&P 2,860 is the 5% line and the bounce lines are 2,875 (weak) and 2,890 (strong)



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Monday Market Mayhem – Trade Lies Unravel and Take the Market with Them

Image result for white house lies cartoon

Telling lies is all you know

You had me believing they were so

Nothing new, yeah, the same old thing

You got me singing the blues againFats Domino

Well it turns out everything the White House said on Friday was BS.

That's not too suprising but the market is acting like it's surprised now that China has stated that no progress was made last week and there are no further meetings scheduled and now the White House is trying to spin the G20 Meeting in June as a summit between Trump and Xi because Xi WILL be there and Trump WILL be there but, at the moment, it doesn't seem like Xi is very eager to speak to Trump, especially after Trump was blatantly insulting in his weekend tweet-storm:


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Tariffic Friday – Trump Taxes Americans, Claims Victory

No deal!!! 

That's right, as we expected Team Trump has not been able to make a deal with China and, as of midnight, tariffs increased on $200Bn (not $250Bn) worth of Chinese goods from 10% to 25%, which isn't really that terrible ($30Bn) but President Crazy Train is also looking to add taxes to another $350Bn worth of goods but, to do that one (legally), the U.S. trade representative’s office would need to identify the goods, seek comments on its choices and hold hearings – so it's very possibly just an empty threat from the President and China knows it because they study US law a lot more closely than Trump and his advisers seem to.

So, in the grand scheme of things, $30Bn more tariffs isn't going to break anyone and the total revenues would be $50Bn (25% of $200Bn), not "over $100Bn" that Trump is fantasizing about and how pissed off do you think Puerto Rico is to have Trump BS'ing about sending humanitarian assistance to "poor and starving countries" when they've been waiting almost two years for something besides paper towels to clean up after their disastrous hurricane?

The Futures are down again today and we may revisit yesterday's lows but we went long on Dow (/YM) Futures at 25,600 in yesterday's Live Member Chat Rooom caught a ride back to 25,850 into the close, which gave us gains of $1,250 per contract while our bullish play on the S&P (/ES) Futures also gained $1,250 per contract on a 25-point move back to 2,875.  

Of course, those same levels will be in play again today but keep in mind we made the call at 11:58 for our Members – as the indexes were crossing back OVER the lines and momentum was on our side – don't try to be a hero and catch the index while it's moving against you – that can lead to big losses if your line doesn't hold.  

In fact, later in the afternoon we analyzed the index moves and determined they were only making bounces off the 5% drop lines according to our fabulous 5% Rule™, which is not TA – just math.  Failing the bounce lines means it's more…
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Faltering Thursday (as usual) – Investors Hold Out Hope on Trade Talks

dafafdThe art of the deal?

The best deal Team Trump can hope for this week is to keep the Trade Talks with China from completely collapsing and sending the markets into a tailspin.  While you hear idiots on TV saying China is coming to negotiate, Trump has set a midnight TONIGHT deadline on more tariffs and the Chinese response has been to reschedule their arrival from Tuesday to today and I want you to contemplate what unrealistic idiots the TV pundits are when they tell you a guy who just got off a flight all the way from China is going to hit the ground running in order to bend over for Trump and concede on all his points in order to get a deal done by 11:59 tonight.

China's Vice Premier Lui He is landing in DC this morning and is scheduled to have dinner with China-hating Robert Lighthizer this evening but don't be surprised if Lui doesn't even spend the night in Washington because, as Tom Hagen sort of said, "Chairman Xi is a man who insists on hearning bad news immediately."  

The die is already cast as Mr. Lui, unlike in previous visits, has not been given the title of "special envoy", which suggests he is no longer empowered to make any trade concessions on behalf of the Chairman.  In other words, Xi has already told Trump to shove his tactics and has left no room for negotiation on the contract they sent over to Washington last week so now it's up to Trump to either bend over and accept China's terms or throw a tantrum and penalize Americans with more tariffs.  

 

IN PROGRESS

 

 

Wednesday Weakness – Selling Pressure Continues

Down and down we go

I said last week that we'd more likely to see 2,800 on the S&P before we see 3,000 but I didn't think things would fall apart so hard and fast.  Still, a correction is a correction and this one is long overdue and it's still very mild as 2,850 is only down 5% from the 3,000 line and that means we expect 30-point bounces to 2,880 (weak) and 2,910 (strong) from there so we know exactly what range to watch and, conveniently, 2,855 is now the 200-day moving average – so it's a perfect level to test to see how real this rally is.

As you can see from this S&P chart, we're moving right within the 5% Rule™ around 2,850 as we predict 30-point incriments to drive the index in either direction.  If we can stay in the top of the range and hold the 2,850 line and get back over the strong bounce line – then we're be consolidating for a move over 3,000 but anything below 2,850 and we'll have to consider another 5% drop (2,700) before this correction is over. 

We're happy either way as we've considerably lightened up our portfolios as of last month, taking 1/3 of our gains off the table in the Long-Term Portfolio and bulking up our hedges – just in case.  Having more cash on the sidelines allows us to take advantage of new trade opportunities, like yesterday's UGA spread and, in our Live Member Chat Room, we decided to buy the long July $29 calls for $2.75 as they weren't getting lower while the $32 puts were an easy sale at $2+ and we're waiting for a bounce to sell the July $32 calls for $1.70 now (to make up for the extra quarter we spent on the calls).  

The July $32 calls are now $1.15 after bottoming at $1.10 and, since we expect $1.70, that's a 0.55 (48%) gain from here so actually it's good for a long play at this point too!  We're nothing if not flexible in our outlook because we're Fundamental Investors which means we know the value of an option and, since we fell the July $32s are worth $1.70, but not more – just…
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