Entries by Phil

Whipsaw Wednesday – S&P 2,684 (again) Gives us Another Shorting Opportunity

Are we stuck in a loop?

This morning, despite President Trump moving the Doomsday Clock up another minute by unilaterally (which means without the agreement of ANYONE else who participated) withdrawing from the Iran Nuclear Treaty, which was put together after years of diplomacy with a dozen countries – including China.  Now the World has to decide who they are going to side with – Iran, who, despite Israel's claims to the contrary, have been adhering to the agreement or Trump, who's a friggin' lunatic.  

Unfortunately, the lunatic already has A LOT of nuclear weapons and he's already stated he's not afraid to use them, so people don't want to be on his bad side.  If anything, Trump's action justify Kim Jong Un's strategy of first building the weapons and THEN negotiating – as the non-nuclear Iran has become Trump's whipping boy while Trump is arranging to meet with Kim, a consideration he has not given to Iran.

Image result for trump iran nuclear cartoonFormer President Barack Obama, who rarely comments on his successor, issued a statement describing Trump's move as a "serious mistake" that could leave the US with a "losing choice between a nuclear-armed Iran or another war in the Middle East."

Some of the US' closest allies, the UK, France and Germany, issued a statement expressing "regret and concern" about the decision, emphasizing Iran's compliance with the deal and their "continuing commitment" to the Joint Commission Plan of Action, as the deal is formally known.  Iran's President, Hassan Rouhani, said he had ordered the country's atomic industry to be ready to restart industrial uranium enrichment, while the country's foreign minister said he would work with the pact's remaining partners — France, the UK, Germany, China and Russia — to see whether they could ensure "full benefits for Iran. Outcome will determine our response," Javad Zarif tweeted.

It is mission accomplised for Trump's Big Oil Donors as oil (/CL) is back over $70 and gasoline (/RB) is over $2.15 wholesale ($3 retail) – just in time for summer driving season,…
continue reading

Trillion Dollar Tuesday – Apple Closes in on Historic Valuation

Image result for one million dollars animated gifOne Trillion Dollars! 

That's $1,000,000,000,000 and that means each $195 (the target) share of AAPL would be worth 0.000000000195 of the company – so don't laugh at Crypto traders for working with completely meaningless fractional currencies!  The difference is that AAPL makes $12 per $195 share which is, in theory, your money as a shareholder.  That means your $195 investment is paid back through earnings in 16.25 years while BitCoin, et al, of course, earn nothing at all.  Although, as anyone with a timeshare can tell you – fractional ownership is never as good as you thought it would be…

If AAPL is not worth $1Tn, then the markets are in big trouble as AAPL is about 15% of the Nasdaq and 4% of the S&P 500 so, if they are going to top out here – the whole market could falter.  Even worse, AAPL has climbed just under 20% in the past 3 months while the Nasdaq is up 7.2% and that's not good since 15% of 20% is 3% so AAPL is responsible for 1/2 of the Nasdaq's total gains since last earnings – if that trend reverses – things can get ugly very fast! 

So, step one to figuring out if the market is going to go higher is figuring out whether it's reasonable to pay $1 TRILLION for AAPL stock.  Apple certainly thinks so, the company is in the process of buying back $250Bn worth of it's own stock and the average volume of AAPL is 37M shares or $6.8Bn at the current $185 price so just the additional $100Bn they have announced would make them the sole buyer of stock for 15 days but, in reality, all they need to do is buy 10% of that per day to create a lot of upward pressure on the price so, in effect, AAPL can easily be the biggest buyer of their own stock every business day for the rest of the year.

Image result for apple stock buyback 2018If most companies were doing that, I'd be very unhappy as it's often a waste to buy back your own stock but Apple just repatriated $250Bn in cash from overseas and, frankly, they have nothing better to do with their
continue reading

Philstockworld May 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 Aprilso 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 April review, we had looked at Top Trades that were initiated through July and, out of 36 trade ideas in 34 weeks, we had 29 winners and 7 losers but 3 of the losers turned around and that left is with 30 wins and 4 losses for a very solid 88.23% 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
continue reading

Non-Farm Friday – Is America Working?

I can only tell you exactly what is going to happen – the rest is up to you!  

On Monday, this is the range we drew for the S&P and, as I said in the Morning Report:

It's like we've simply zoomed in on the exact same chart but that "zoom" means we've cut 1.67% off the range and now the S&P is stuck in a 3% range, between roughly 2,600 and 2,700 and, if we zoom out a bit more, we see that tightening range is wedged right between the 200-day moving average at 2,611 and the 50-day moving average at 2,688 and the narrower this range gets, the more those averages squeeze together leading to a very exciting resolution at some point.

Remember, the 5% Rule™ is not TA, it's just math but we illustrate the math on charts – that's all they are good for, really.  Charts tell you where you've been, not where you're going and, if you want to stay ahead of the market, you should use the 5% Rule™ – because it tells you which way the markets are heading.  In January the 5% Rule™ told us the markets were wrong and the rally was overdone.  That's why our Short-Term Portfolio is up 85% for the year – because we made the right bet at the right time.

On Monday morning, the chart predicted by our 5% Rule looked like this:

As you can see above, it turns out we had a perfect short on at 2,684 on /ES and then we fell right to the Weak Retrace line at 2,596, which was an 88-point drop and the S&P Futures (/ES) pay $50 per point, per contract so the gain from that play was $4,400 on the way down and then flipping positive at the bottom of the range paid another $1,500 per contract at 2,626 and now we'll see if this morning's Non-Farm Payroll Report can push us back to the higher end of the range.

It's useful to know what the trading range of an index is, right?  Of course, using our 5% Rule along with our Fundamental Analysis, we can determine the…
continue reading

Falling Thursday – Elon Musk Pleads the Fifth in a Conference Call – Who’s Next?

WTF?

Elon Musk, the CEO of Tesla (TSLA) gave a Donald Trump-like conference call yesterday where he refused to answer questions and insulted the analysts – even calling out "fake news" on well-documented problems with their auto-pilot system.  At one point in the call, Musk ignored the professional analysts for 23 minutes to chat with a blogger who had "friendlier" questions than, for instance "How are you going to replace all the cash you are burning?" and "How many model 3s will you produce now that you've failed to hit goals for the 3rd consecutive quarter?"  

This morning, even their biggest supporter at Morgan Stanley is bailing:

"While the consequences are unquantifiable, we believe Tesla’s CEO made a mistake in refusing to answer some of the analyst questions about the Model 3 ramp. Additionally, we found the posture out of character with the normally inviting,enlightening tone of prior conference calls over many years," writes Morgan Stanley's Adam Jonas.

To be clear. Tonight’s conference call didn’t go very well. Feedback we have received from investors during and following the call support this view. Irrespective of the Tesla CEO’s annoyance with the genre of questions he was receiving from the analyst community, we note that an important part of Tesla’s success has been its relationship with the capital markets in funding its ambitious plans. The analysts on the call represent the providers of capital that Tesla has throughout its history depended upon.

Image result for elon musk failure cartoonOther analysts blasted TSLA as well:

  • TESLA INVESTORS SAY ODD EARNINGS CALL ’SHOOK CONFIDENCE’: RBC
  • TESLA LIKELY TO FALL TODAY AFTER ‘TRULY BIZARRE’ CALL: JPMORGAN
  • TESLA REITERATED SELL AT GOLDMAN ON LIKELY MISSED TARGETS

Musk is playing a serious game with other people's money and refusing to answer questions about what he's doing with that money and whether or not his company
continue reading

Wednesday Weakovery – An Apple a Day Keeps the Bears at Bay

Image result for iphone x salesWhat is fake news?

I'm not going to talk about AAPL earnings because everyone is talking about Apple earnings but I am going to make you a better investor by helping you to break the habit of making investment decisions based on BULLSHIT!  How do you know what is bullshit and what is not?  At PSW, we do our best to help our Members weed through the market noise and separate the real news from the fake news so we're pretty good at it at this point.

I often point out the fact that Apple tends to be attacked into earnings by funds who want to drive the stock down, so they float rumors about Apple that they know AAPL will not respond to and there's not much we can do about that (Jim Cramer explains how "every fund manager does it if they want to keep their job") - other than applying logical analysis to the story to see if it makes sense.  Something you can do, however, is to stop reading the publications that publish this BS as if it's real news.  

Sales of the IPhone X are a good example.  As it turns out, the IPhone X is Apple's best-selling smartphone EVER (for this part of the cycle) yet think about how many articles you read saying, very authoritatively, that the IPhone X was a disaster and people weren't buying them and Apple was going to discontinue it and give up on their "experiment".  It's been going on for months yet the completely irresponsible "news" sources that published that nonsense will go unpunished and keep misleading you in order to steer you into another round of bad investment decisions based on their fake, Fake, FAKE news.  


continue reading

May Day Massacre – Markets End April with a Whimper

Image result for stagnant wages top 1%Europe is closed, Asia is closed.  

Today is a day the World celebrates it's ordinary workers so, of coure, American doesn't even aknowledge it.  As you can see from the chart, since the Reagan Revolution (when the Rich overthrew the Poor and set up an Oligarchy in the United States), the wages of the Top 1% have grown 138% in the past 4 decades while the wages of the Bottom 90% have grown just 15%.  To acknowlege the working poor in this country would be to potentially begin a conversation on how badly we treat them – and that's a conversation the Oligarchs dare not have in America.

As the Wage Gap expands, so does the Wealth Gap, exponentially – especially now that we're no longer taxing the wages of the wealthy.  As I warned back in 2007's "The Dooh Nibor Economy (that’s “Robin Hood” backwards!)":

One of the great tricks of our economy is that there are avenues of wealth creation that are available to those of us who are already rich that are denied to those of you who aren't.  Only 1% of a Prince and Associates survey of high net worth individuals between $5 and $10M invest in ETFs and only 17% invest in mutual funds, NONE of the investors with more than $20M in assets invested in mutual funds, which are the new "opiate for the masses" but that's a whole other article I will write!  76% of the super-rich (> $20M) invest in hedge funds (Ka-Ching for me!) and another 36% invest in my other enterprise, start-up companies privately and through venture capital firms (and you think I just choose these professions at random).

Obviously, if you have less than $1M in household income you are essentially prohibited from investing in hedge funds due to government restrictions aimed at keeping out the riff-raff protecting the small investor.  This game is rigged so that the bottom 90%


continue reading

Monday Market Movement – S&P 500 Channel Narrows into Earnings

When February started, the S&P looked like this:

Now May is starting and the S&P looks like this:

It's like we've simply zoomed in on the exact same chart but that "zoom" means we've cut 1.67% off the range and now the S&P is stuck in a 3% range, between roughly 2,600 and 2,700 and, if we zoom out a bit more, we see that tightening range is wedged right between the 200-day moving average at 2,611 and the 50-day moving average at 2,688 and the narrower this range gets, the more those averages squeeze together leading to a very exciting resolution at some point.

Remember, the 5% Rule™ is not TA, it's just math but we illustrate the math on charts – that's all they are good for, really.  Charts tell you where you've been, not where you're going and, if you want to stay ahead of the market, you should use the 5% Rule™ – because it tells you which way the markets are heading.  In January the 5% Rule™ told us the markets were wrong and the rally was overdone.  That's why our Short-Term Portfolio is up 85% for the year – because we made the right bet at the right time.

Image result for buffett be greedy when others are fearfulKnowing the bottom of our range lets us know when to buy while other are panicking that there is no bottom and knowing the top of our range lets us know when it's time to cover or sell to the suckers who think rallies will last forever.  What the 5% Rule does, in essense is simply to reinforce Warren Buffet's adage to "Be fearful when others are greedy and be greedy when others are fearful.”

This is not a complicated concept – almost any value investor knows it but there are very few of us value investors left in the World and most of the trading world acts more like the audience in a Bugs Bunny cartoon – stampeding in and out of the positions (5:00) whenever somebody throws a switch.  At Philstockworld, we teach our Members to


continue reading

Friday Thoughts – Did Amazon’s Great Earnings Save the Markets or Doom Them?

Image result for pinky brain take over the world animated gif$134 BILLION! 

That's what Jeff Bezos is worth this morning as Amazon (AMZN) crushed earnings last night with $51Bn in sales for Q1, up 43% ($16Bn) from Q1 last year.  And Q1 is usually AMZN's slowest quarter so we're taking about possibly a $300Bn year, which would make Amazon approximately 1/10th of all US Retail Sales and growing at 43% means we are 7 years away (do the math) from AMZN putting every other retailer out of business.  

Operating income was $1.927Bn, which seems good but not when you consider $3Bn of that $2Bn in profit came from cloud services and the rest of the business lost $1Bn.  In fact, inclusive free cash flow was NEGATIVE $3Bn but let's not cloud the Amazon celebration with ugly facts like those.

I didn't make this up – it's their own slide!  Still, $4Bn of that $3Bn "loss" came from leasing payments (cloud computers are expensive) and they are kind of an asset – until the next generation of computers comes out in 18 months.  One thing Amazon will be doing to close the ga is raising the fees on 100M Prime Members by $20, which will drop another $2Bn to the bottom line but it won't help much if they are burning $3Bn a quarter. 

Speaking of slides, that's what the Retail ETF (XRT) and the rest of retailers are likely to do if Amazon's gains turn out to be Retail's losses.  I just ordered $60 worth of Nespresso pods this morning on Amazon despite the fact I was right in a grocery store yesterday.  Amazon is very good at getting you into the habit of buying things once you let them know what your preference is and now they are delivering things to the trunk of your car if you want!  

We don't have a lot of Retailers in our portfolios and we went over the ones we do like in yesterday's Live Trading Webinar (replay available here).  I imagine we'll see some real bargains popping up over the next couple of weeks and we're still in the middle of the end for Toys R Us and Sears though Toys R Us is more like the end of the end now.  

 

IN PROGRESS

 

 

Thrilling Thursday – Indexes Run Up to the Strong Bounce Lines – Now What?

Image result for meaty beaty big and bouncyWe're right at our bounce targets.  

Dow 24,100, S&P 2,646, Nasdaq 6,575 and Russell 1,557 were our strong bounce lines in yesterday's Report and that's right on the 7,000 line for the Nasdaq Composite we are using as a major "pass/fail" level for the market in general.  A lot of strong earnings from Tech last night ONLY got us to the 7,000 line – so not very impressive so far and I am in favor of shorting the Nasdaq (/NQ) at the 6,600 line with VERY tight stops above that line.  We might get another spectacular failure on any hiccup in earnings this morning.

There's not really any news driving things but we do get a Durable Goods Report at 8:30, Consumer Comfort at 9:45 and the Kansas City Fed Reports at 11 ahead of a 7-year note auction at 1pm in which the US will attempt to borrow $29Bn at less than 3% interest so "THEY" want the market to be lower at 1pm to herd the sheeple into bonds – we'll see how things play out.

If you didn't like where the market was yesterday, all you had to do is walk away for an hour and it would be heading the other way when you got back.  The Dow went from 23,850 at 7:30 to 24,050 at the open to 23,800 at 9:45 to 24,000 at 11 back to 23,850 at noon and then on to 23,950 just after 1pm and back down 50 and then a nice move to 24,100 at 3pm but it was too much, too soon and we fell back 100 points into the close but then, miraculously, in the last 5 minutes, we spiked back up 75 points to engineer a decent close.  If it sounds like total BS, that's because it was – this is a thin, bot-traded market and clearly it's being pushed up whenever the volume is low and then sold off to the suckers who think they are smart for buying the dips. 

As I said on Monday, when the Dow was at 24,450, which is now 300 points from here, we're waiting for the week's and Amazon (AMZN), MSFT (MSFT), Intel (INTC), Starbucks (SBUX) and Bidu (BIDU) get their licks in tonight followed by Exxon (XOM) and Chevron (CVX) tomorrow so, in the very least, we…
continue reading