Entries by Phil

Friday Already – What Next?

Don't you just love short weeks?

That's why, as of March 19th, I will be officially retiring from Mondays.  Despite all the fun discussions of quick trades, the bulk of the trade ideas at PSW are long-term, fundamental value plays that we pretty much don't even touch month-to-month.  We're always looking for opportunities of course but Mondays are usually silly, low-volume days in the markets and poorly attended by our Members as well – as they like to have their Mondays off too.  So, as I turn 55 next year, I've decided to move into stage one of my retirement and cut Mondays off my schedule.  That will make every week a 4-day week but still plenty of time to make money!

That's why we are focusing this year on demonstrating the value of long-term investing.  The new portfolio we're doing for Money Talk is another example of the "set and forget" trading style which dominates our portfolios and, if we can make 40% returns working 4 days a week – why not put it to our advantage and take 3 days off?  Only 5 more years before I cut out Friday too!

All of America would benefit from a shorter week.  First of all, if we all worked 4 days a week, they'd need 20% more people to do the jobs.  The people who have an extra day off would have more time to shop and go out – putting more money into the economy and everyone would be in a better mood – America solved.  Even if we all worked 4, 10-hour days instead of 5, 8-hour days, things would be better off and we'd save 20% of our commuting costs and fuel consumption as well.  Personally, I already work 12-hour days – so I'm REALLY looking forward to cutting one out…

I could have skipped yesterday morning as our Dollar play /DX is down $300 per contract at 91.10 and the Sept $22.50 calls are $1.30, down $100 per contract.   That's not terrible but we're very spoiled as it's the first Futures trade we've missed in two weeks, though we did expect a rough start as Fisher quit in the morning but at least we all got great entries and plenty of time to get in (we
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Free Money Thursday – ECB Votes to Keep Giving it Away

Image result for draghi free money

"My baby gives it up every day

My baby gives it, she gives it away

My baby gives it up every day

My baby She just gives it away" – Townshend


Not too surprising as that's the answer Goldman Sach's pet Central Banker, Mario Draghi, has for every situation but today's announcement from the ECB to hold rates steady AND continue pumping 60 BILLION Euros PER MONTH into the economy ($864Bn/yr) was more generous than expected in an economy that is closer to inflation than deflation with record-low unemployment and markets at all-time highs.  Is this really still not enough?  

The composite PMI is already over the ECB's 2% target and inflation in the Euro-zone has gone from 0% in 2015 to 0.5% last year and now is 1.5% and the ECB is bound by law to tighten if inflation goes over 2% so it seems like Draghi will only close that barn door long after the horses have bolted.  This is especially worrying as the only reason we're getting low inflation readings now in the ECB is because the Euro has gotten much stronger – up over 15% since April.

For many economists, the central bank has little choice but to slow buying next year — simply because it’ll soon run out of bonds. Holdings are scheduled to reach nearly 2.3 TRILLION Euros by the end of the year, equivalent to almost a quarter of the bloc’s annual output.  “The question is whether a shortage of bonds in some markets will turn into outright scarcity, and how best to address this problem,” said Marchel Alexandrovich, an economist at Jefferies in London.

Meanwhile, we're watching out for Irma as she heads towards Florida and, as we predicted for you in yesterday morning's PSW Report (only $3/day to have it delivered pre-market), oil topped out just under $49.50:

Generally, I expect strong bounces today but failing those will put us

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Whipsaw Wednesday – Beige Book Edition

Wheeeee – that was fun!  

Our trade idea in yesterday morning's PSW Report was, very simply: 

Our favorite short at the moment is oil (/CL) below the $48.50 line with very tight stops above.  We also like the Russell (/TF) below the 1,415 line – tight stops too. 

Oil went the other way and we never got a proper entry but the Russell was perfect and gave us a long chance to go short at the open and then promptly began falling straight down to the 1,400 line for very quick gains of $750 per contract.  This morning we flipped long at the 1,400 line, expecting at least a strong bounce which, after a 15-point drop, per our 5% Rule™ would be 6 points – to 1,406.  Anything less than a strong bounce that holds into the close will be a bearish sign for tomorrow.

The market sold off for very good reasons but the selling volume was still pretty low (89M on SPY) though declining volume on the Nasdaq (1.36Bn) was 272% of the advancing volume (50M) so it's very unlikely that everyone who wanted to raise more cash got their wish on just yesterday's action.  

Still, if we do make our strong bounce lines we'll have to stay long as this market has been indeftigable all summer long and it's not the kind of tide we want to be fighting.  I did just send out a Top Trade Alert this morning with long trade ideas on Apple (AAPL), Wheaton Precious Metals (WPM), Limited Brands (LB) and IMAX (IMAX) which I will also be speaking about with Kim Parlee over at Money Talk this evening.  

We're going to start a Money Talk Portfolio as we are retiring our Nasdaq Portfolio due to a change of policy over at the Nasdaq where they don't want specific trade ideas discussed (they don't want to seem like they are favoring one stock over another) so, officially, we're done with that portfolio as it stands:

Though the portfolio is up 19.6%, we never deployed much of our $25,000, using less than $10,000 in cash to make $4,890 (49%) in less than 5 months.  The SQQQ spread is losing, at the moment and is currently net $3,565…
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Labor Day is Over, Postpartum Depression Sets In

Image result for north korea hydrogen bombNow what?

We made it through the Holiday that marks the end of the Summer of Trump (like the Summer of Love, but with a lot more Hate) and now we are stuck with the baby World we've made and it just spit up a hydrogen bomb.  Daddy Trump promised "fire and fury the likes of which the World has never seen" if baby NoKo simply fired another missile, which they did over Japan last week but the weekend's HBomb was a move to a whole new level of telling Trump to F off. 

Now Mr. Trump has to either put up or shut up but, of course, no one actually believes a word he says (including, obviously, Kim Jong Il), which makes him sort of totally ineffective as a figure of authority in this situation.  That's the downside of constantly lying, I suppose, people don't believe you when it matters the most.

Of course, the President probably didn't read "The Boy Who Cried Wolf" as it's a book, with words and stuff – so how could he possibly know that losing all credibility might come back to bite him in the ass one day?  After all the bluster about what he WOULD do if North Korea crossed the line they just leap-frogged over, all the Trump Administration has actually done as the Doomsday Clock ticks forward is to call for more sanctions – and China won't even let them do that!















Non-Farm Friday – Is America Working

Dow 22,000, Nasdaq 100 6,000, Russell 1,400, S&P 2,475! 

NOW we have something to celebrate over the holiday weekend.  We had a fantastic week trading the Futures – other than my Dow shorts, which got crushed (see yesterday's post) but I'm still in them over the weekend – just in case North Korea nukes us or gets nuked or if people realize the GOP tax cuts are nothing more than a massive transfer of wealth from the Middle Class to Donald Trump, his family, and his friends.  

Notice on Paul Ryan's Simple Tax Postcard, that line 2 says "Add 1/2 of investment income."  Half?  What about the other half?  That's an interesting way to sneak in a 50% tax cut for the rich, isn't it?  MOST of the money rich people make is investment income.  And, as noted by VOX:

One is that line 3’s reference to “specified savings plans” is completely punting on the question of what the specified savings plans are.

The other is that in lines 9, 10, and 11, the form achieves simplicity by saying nothing at all about what the relevant credits are or who is eligible to claim them and in what quantity.

To make either of these provisions work, you would, in practice, need to work with some additional forms.

The reason a tax form is complicated is because it's real.  Paul Ryan and Donald Trump's fantasy post-card is no different than the current 1040EZ form except it's laid out differently (and omitting details like you name, address, date, signature…) and, of course, in order for this to work you'd have to put your Social Security number on an open post card – like some kind of moron who never heard of identity theft.  …
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Enthusiastic Thursday – Dressing the Windows for the Holidays

Related imagePropaganda! 

That's what you are seeing in the markets this morning.  What do "THEY" want you talking about with your friends and relatives at the weekend barbeque?  They want you to tell everyone how resiliant the markets are and how you "can't lose" on bullish bets and how buying the dips is a brilliant strategy.  Why?  Because every good Ponzi scheme needs a fresh round of suckers to keep things going!  

Since our down days on Aug 17th and 18th, market volume has vanished and our "recovery," such as it is, has been very narrowly based – with just a few of the market-moving stocks taking the indexes higher, which forces the ETF algorithms to BUYBUYBUY – without the need of human intervenetion.

Here's a look at the volume on the S&P 500 ETF (SPY) over the past 10 days:

Date Open High Low Close* Adj Close** Volume
Aug 30, 2017 244.83 246.32 244.62 246.01 246.01 58,757,200

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Which Way Wednesday – GDP Edition

To 3(%) or not to 3(%).

As you can see from the Fed's GDPNow forecast, it's raging ahead of the forecasts of our leading Economorons by a wide margin.  Usually, I bet against the Economorons but the Fed is full of them too so it's a toss-up as to who is likely to be more wrong but we have a short bet on the Dow Futures (/YM) at 21,900 that says it's the Fed.  

We took that bet in our Live Trading Webinar yesterday afternoon and added to it this morning as the Dow popped in early morning trading, getting all excited about a European open that's fading fast as of 6:35.  To some extent, it's a hedge against our long Oil (/CL) bet at $46.15, which is a double-dip from the bet that made us gains $500 per contract in the first hour of our live webinar (you're welcome!).  

This morning, Gasoline (/RB) is looking cheap again at $1.63, so I like a long there with tight stops below $1.625, which would still be a $210 loss as gasoline contracts are expensive at $420 per penny – so be very careful trading them.  We'll see if the oil inventories (10:30) can get both to break higher, the API Data was encouraging for the bulls, showing a 5.78Mb draw in crude, up from 3.6Mb last week but that data was through Friday – ahead of the storm.

Oh, and don't cry if you missed yesterday's PSW Report (subscribe here and never miss one again) but you know those Gasoline (/RBV7) contracts that were up $1,755 early yesterday morning at $1.585 and I said you missed the first 0.02 of the move?  Well, this morning we got the rest of the 0.10 to $1.655, so that's another $7,020 gained on our 2 long contracts, up $3,510 per contract – wasn't that easy?  

That's right, while I was writing this post (which 









Tumbling Tuesday – NoKo’s Missile Test over Japan Freaks Markets Out

It's always something, right?

We don't know what specific event we are hedging against but mornings like this remind us WHY we hedge our portfolios.  When the market is priced to perfection, it doesn't take a great deal of effort to bring it down and, this morning, all it took was North Korea firing a small test missile 1,700 miles, right over the top of Japan.

While the missile was still in the air, Japanese authorities sent an alert to northern areas near its path.  “A missile has apparently been launched from North Korea. Please take refuge in a sturdy building or underground,” the alert said. The warning was lifted a few minutes later, after the missile went down in the Pacific.  Japanese Defense Minister Itsunori Onodera said initial analysis suggests the missile was an intermediate-range ballistic missile of the same type that North Korea fired on May 14th.

Just last week U.S. Secretary of State, Rex Tillerson, praised North Korea for exercising “restraint” in not having conducted any missile tests during joint annual exercises between the U.S. and South Korean militaries, which began on Aug. 21st but are still ongoing – so much for that!  “How the U.S. responds to this provocation will be closely watched by both Japan and South Korea, and could be a critical moment in alliance relations,” said Jenny Town, assistant director for the U.S.-Korea Institute at Johns Hopkins University’s School of Advanced International Studies. ?Given the administration’s strong response to the earlier threat against Guam, she said, “a tepid response now to this missile test further erodes U.S. credibility with our allies.”

Image result for kim jong un trump

There is nothing more terrifying than a power-mad authoritarian ruler with a bloated ego that has to constantly be stroked by his sycophantic followers who have to primp up even his smallest accomplishments to keep him in a good mood, to prevent him goes off the rails and doing something even crazier than usual.   A "leader" like that thinks nothing of lying to his own people, restricting freedom of the press and blaming all of his administration's troubles on scapegoats – firing (or murdering) staff members whenever something goes wrong for them.  Imagine having to live under

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Monday Market Musings – Making Money on Misery


Those same 2 gasoline (/RBV7) contracts we initiated in Wednesday's Live Trading Webinar (which I reminded you of in Friday morning's PSW Report) made another $700 per contract over the weekend and we stopped out with over $5,400 gains at the $1.60 line as Hurricane Harvey seems to have peaked out and Gasoline Futures hit our +5% on the money.  That's a big YOU'RE WELCOME to get our week started but our hearts go out to the people of Texas, who are suffering from the after effects of the storm we used to make money on.

If NOT betting gasoline would go up when a hurricane hits the Gulf Coast refineries, then I would have felt bad about the bet but this was one of those essentially sure things you really can't pass up if you want to call yourself a trader.  As it stands, about 22% of Gulf Refining Capacity is off-line and that's 1Mb/d our of 5 that's going to get drawn out of inventories for the duration because the rest of US refining has been operating near capacity and can't make up that kind of shortfall – unless they curtail exports, which is possible.

Even if the damage near the refineries is controlled quickly, widespread damage throughout the area will make it hard for refinery workers to get to work — the Shell plant, for instance, has more than 3,000 workers and contractors.  As you can see from this handy map, Valero (VLO) is losing 416,000 barrels a day in two hard-hit refineries and Marathon (MRO) will be down 546,000 barrels and, with 1-45 closed, it's likely to be a good week at least before they are full on-line again, probably 2 weeks. 

Of course, news is not all bad for VLO, who we're long on, as the refiners are benefitting from a widening crack spread – the cost between the barrels of oil they buy and the price of the refined products they can sell when they "crack" the barrel open.  We got aggressively long on VLO in our Aug 18th Butterfly Portfolio Review and we didn't know about Harvey at the time but we did know we expected a stronger than usual…
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Force 3 Friday – Hurricane Harvey Throws Markets into Turmoil

Image result for hurricane harvey animated gifThis is a huge storm.

We haven't had a storm like this hit the land in over a decade and 2-3 FEET of rain are expected where Harvey hits land in the Gulf Basin.  That will take many refiners off-line and Gasoline (/RB) and that's already fantastic for our long Futures contracts, which we discussed during Wednesday's Live Trading Webinar (Oil, /CL too) and /RB is already up over $2,000 per contract at $1.725 while Oil is, so far, struggling to retake $48 but that's still good for $500 per contract every time we go from $47.50 (our long line) to $48.

Also, the Natural Gas (/NGZ7) long trade idea from Monday morning's PSW Report at $3.07 already popped 0.10 for an $1,000 per contract gain - you're welcome!  And, by the way, at the time (Monday morning) we were shorting oil at $50 so the trip down to $47.50 was a $2,500 per contract winner until we called for the turn – aren't Futures fun?  Speaking of fun, the Russell Futures (/TF) are back to our shorting line at 1,377.50 and closing in on the other lines we discussed in Wednesday morning's Report, which were:

As we expected, we did hit our strong bounce lines on on the Futures in yesterday's action at Dow 21,800 (21,850), S&P 2,442.50 (2,450), Nasdaq 5,850 (5,870) but missed Russell 1,377.50 (1,372.50) so we shorted the Russell at the 1,370 line and, this morning, we're already up $250 per contract at 1,365.  That's exactly what we said we'd do – wait for the strong bounces and short them as they cross back under.  Now we're waiting to see if the other indexes cross back under or if the RUT comes up to join them and confirms a more bullish rally.  Dow (/YM) 21,850 is my next favorite short. 

That is the Russell chart from Tuesday morning's Report and, since then (when we were long), we have drifted back towards our shorting line at 1,377.50 but, to stay short, we need to see failure at Tuesday's opening lines (Dow 21,850, S&P 2,450 & Nasdaq 5,870) and it's tricky today as…
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