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Phil's Stock World

Daily stock picks and option trades, market analysis, and investing strategies for investors and traders of all types.

Last Build Date: Sat, 21 Jan 2017 00:30:29 +0000


The Trump Error Begins!

Fri, 20 Jan 2017 13:38:22 +0000

(image) Did the Romans know it was over?  

In 476 AD, the Germanic leader Odoacer, deposed Emperor Romulus Augustulus and that was the true and official end of the Roman Empire but Rome was first sacked in 410 by Visigoth King Alaric and had limped into it's final decades.  But you have to go further back than that as the Goths killed Emporer Valens in 378 but he was only the "eastern Emperor" of Rome as the country had already split along party lines due to political in-fighting which caused Emporer Diocletian to divide the Empire into 2 halves.  Those two halves could never agree on Government priorities and the Empire essentially dissolved into chaos

Unlike today, January 20th, 2017, there was no particular day to point to and say: "Yes, that's when the Romans elected a guy who said he will change everything and he did – and then the Empire was destroyed."  We will have the luxury of knowing exactly when we made the decision that pushed America over the edge – or maybe on to greatness (again) – who's to say?

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On the bright side, as noted by Samantha Bee, Trump doesn't actually do what he says.  Or, then again, maybe he does because, as he said in Michigan: "When you cast that ballot, just picture a Wall Street boardroom filled with the special interests who are bleeding your country and your city and everyplace else…"  He is certainly delivering that already, with what the Washington Post calls "the worst Cabinet in American History" – a complete and utter sell-out to Wall Street and Special Interests.  

As just one colorful example, let’s look at this report in today’s New York Times about Rick Perry, who will be Secretary of Energy. The change from the leadership under Barack Obama is already striking: the current secretary, Ernest Moniz, is a respected nuclear physicist who also came to the job with significant experience managing scientific institutions, and he’ll be succeeded by someone who advocated eliminating the department, although in his defense Perry couldn’t quite remember that it was the one he wanted to get rid


Thursday Thoughts: Waiting on Yellen and Trump

Thu, 19 Jan 2017 13:20:48 +0000

(image) Has the Dollar bottomed?

After a 2.5% pullback to start 2017 the Dollar has popped 1% in the past two days after Janet Yellen made a 3pm speech saying U.S. economy is “close” to the Central Bank’s objectives of full employment and stable prices and she’s confident it will continue to improve.

It is fair to say the economy is near maximum employment and inflation is moving toward our goal,” Yellen told the Commonwealth Club in San Francisco Wednesday. While “it makes sense to gradually reduce the level of monetary policy support,” the timing of the next interest-rate increase “will depend on how the economy actually evolves over coming months,” she said.

(image) So the better the economy does, the faster the Fed will raise rates (duh!) and Yellen indicated a target for a 3% Fed funds rate by 2019, which would be 9 raises from here – a faster pace of increases than most economorons were expecting.  Inflation is, of course, exactly what we're expecting in 2017 and 2018 and I discussed that strategy on Money Talk last night.

The last time unemployment was this low was back in 2006 and 2007 and that marked the end, not the beginning of the market rally.  Full employment leads to higher wages and higher wages lead to inflation and that is so obvious I feel silly for saying it but, apparently, it's a surprise to "leading economists" who are consistently shocked by things they should have learned in Econ 101.

(image) That's why I'm growing a beard – I've decided to become a leading economist so I need to start looking the part!  As you can see from this chart, 4.9% unemployment is low but we've been down to 4% so we can go lower and our new President promises to create those jobs (1.6M jobs = 1%), which is no different than promising to create inflation and so, we have our "Secret Santa’s Inflation Hedges for 2017," including the Trade of the Year we discussed on TV last night.

As much as it wants to, the market simply cannot have it all.  If we are going to lower unemployment than we are going to drive labor costs higher (until we're all replaced by machines,…

Wonderful Wednesday – Oil Sell-Off Gives us $1,500 Gains to Start the Week

Wed, 18 Jan 2017 13:50:07 +0000

(image) Wheeeeeee! 

That's the sound we make at PSW when we get a nice sell-off and it doesn't get much nicer than making $1,500 PER CONTRACT off our call to short Oil Futures (/CL) at $53.20 in yesterday morning's post as we rode down a $1.50 drop back to $51.70.  

That wasn't our only winner either – Gasoline contracts (/RB) were shorted at $1.65 and they fell quickly to $1.60 so we took that money ($2,100 per contract) and ran though they picked up yet another $840 in the overnights as gasoline continued to fall – all the way to $1.58 this morning where we flipped long (as well as long on oil at $52.50 on the new, /CLH7 March contracts) – looking for a small bounce but with little conviction – as we still think oil can go lower.  


As we have told you, we can make great calls like this because the energy markets are just a scam and we have a pretty good idea of how that scam works.

(image) Now, there are some people (who shall remain nameless) who think that NYMEX traders trading 4 BILLION barrels worth of contracts (4M) back and forth during a month in order to ultimately accept delivery of less than 20M barrels (0.5%) is somehow legitimate speculation but the friction costs alone of trading 200 barrels for each barrel delivered ads $20 to each barrel purchased in the US – even if it were legitimate, the practice should be stopped!  

Yesterday, I printed a chart of the NYMEX open contracts and I said that the 197,589 open orders (at 1,000 barrels per contract) for February were FAKE!!! and that they would be cancelled and put into other months to FAKE!!! demand in future months so the cycle can repeat.  Our short bet was based on the pressure they had to sell or roll the Feb barrels over the next few days.  Already today we can see the difference:


Tricky Tuesday – How Will the Markets Perform with Volume Trading?

Tue, 17 Jan 2017 12:57:47 +0000

(image) Are we there yet?

The average volume trading on SPY, the S&P ETF is 100M shares per day yet this month, the average has been 70M so about 30% less trading than "usual", which was very slow to begin with (down 25% from last year).  A lot of times, if you are day-trading and you feel like you're the only one in a position – you are probably right!  

As you can see from the above chart, when you see these kind of toppy, sloppy patterns – it's best just not to trade and wise traders go to CASH!!! (have I mentioned how much I like CASH!!! lately?) and wait PATIENTLY for conditions to improve.  If that chart looks familiar to you – just check out what the S&P 500 Futures (/ES) have been doing for the past few weeks:


That is what they call a "textbook" example of a market that is not good to trade.  That's why we stopped making calls in our morning posts after a fantastic first week of the year:  A) We didn't want to ruin our perfect record and B) There were no longer any very obvious trades to call.  We did, however, call oil short at $54 on the 6th and it's been up and down but now $53.20, which is still up $800 per contract from where we called it and now we're calling that one short again (/CL) as well as Gasoline (/RB) at the $1.65 line.

(image) Why are we short oil and gasoline?  Well oil, in particular, is nothing more than a gigantic fraud of a market that is based on the artificial manipulation of what has always been, historically, a plentiful supply.  As we all know, OPEC spent most of last year promising to cut production and, FINALLY, this January they actually did cut production, by 1.5% of Global supply and this morning they spiked oil from $52.20 to $53.20 by releasing a statement from the Secretary General predicting oil prices would stabilize in 2017 and hit $70 by the year's end.