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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: Fri, 19 Jan 2018 06:50:33 +0000

 



Thin Air Thursday – Markets Begin to Gasp At New Highs

Thu, 18 Jan 2018 13:30:26 +0000

(image) Higher, higher!  

Up and up the markets go but we see shorting opportunities this morning IF we cross back below Dow (/YM) 26,100, S&P (/ES) 2,800, Nasdaq (/NQ) 6,810 and Russell (/TF) 1,585.  The rule of thumb for shorting the futures is wait for 2 to cross below and then pick the next one that crosses and keep very tight stops back above the line and if ANY of the indexes go back above their line – kill the trade and wait for the next set-up.

We demonstrated the stopping out part in yesterday's Live Trading Webinar but I missed my chance to flip long as we got caught up in another discussion and missed the Beige Book Rally.  Still it was a nice day trading as we picked up $4,312 on our Coffee (/KC) trade and now we're waiting for a nice pullback to reloaid and do it again.  Speaking of releading, we're still short on Gasoline (/RB) at $1.86 and it's a $1.865 this morning so we're down $210 per contract at the moment – ahead of the EIA Inventory Report at 10:30.

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(image) The Futures are not only a fun way to pick up some extra cash while we wait for our positions to pay off but they also provide a quick hedge – even when the equity markets are closed.  As you can see from the chart, our call on the Dollar long at 90 in yesterday morning's PSW Report was also a nice winner, topping out at $750 per contract and now back at 90.40 but we think consolidating for a better move up – hopefully to 92.50, which would be $2,500 per contract gains.  

Remember, I can only tell you what is likely to happen and how to make money playing it – that is the extent of my powers – the rest is up to you!  

(image) As we're moving into earnings season, this last leg of the market bubble is being driven by earnings revisions due, mostly, to Trump Tax Breaks but, as we warned about
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Which Way Wednesday – Will the Wild Ride Continue?

Wed, 17 Jan 2018 13:47:09 +0000

(image) Wheeee!   

Yesterday sure was fun.  The Dow Futures (/YM) blasted up to 26,050 at 10am and then, by 3pm, it was back at 25,700, down 350 points (1.34%) in 5 hours.  But don't worry, we recovered 100 into the close and now we just tested 26,000 again, which is a good shorting line with tight stops above since yesterday's 300-point drop was good for gains of $1,500 per contract for the shorts.

In our Live Member Chat Room, we stuck with the Russell Futures (/TF) shorts at 1,600 and those fell all the way to 1,575 for gains of $1,250 per contract and we added longs on the Dollar (/DX) at 90 and Coffee (/KC) at $120 while, of course, taking the $1,000 gain on /RB and runningthe same short at $1.85 we played all last week in our morning Reports (you're welcome!).  

(image) We still like the Russell for a hedge into earnings and, in the Live Member Chat Room, we chose the following hedge at 11:25, just in time for the massive 100-point drop in the Russell but we're back to 1,585, so you can still make the hedge on the Ultra-Short ETF (TZA) as follows:

  • Sell 30 TZA 2020 $10 puts for $2.50 ($7,500) 
  • Buy 40 TZA July $10 calls for $1.80 ($7,200) 
  • Sell 40 TZA July $15 calls for 0.60 ($2,400) 

That gives you a net credit of $2,700 and a $20,000 upside on the July spread if TZA pops from $11.40 to $15 (31%) and, since it's a 3x short ETF, that would mean the Russell would have to drop about 10%, back to 1,425, which doesn't seem like much of a stretch after yesterday's quick plunge.  If the Russell doesn't fall, then we take the remaining $2,700 and invest it in rolling the long July calls to something lower in January and then cover with short Jan calls and then we have a full year of insurance in exchange for our promise to buy 3,000 shares of TZA for $10.  The idea, of course, is that our longs make much more money than our TZA shares would lose – hedges…
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Terrific Tuesday – Futures Blast Market to New Highs – Just Because

Tue, 16 Jan 2018 13:26:32 +0000

(image) Dow 26,000?  Really???

That's right, the Dow blasted 1% higher this morning to hit 26,000 and the S&P 500 hit 2,800 and the Nasdaq 100 hit 6,800 and the Russell hit 1,600 all record highs ahead of the Government shut-down on Friday (not really, they will extend it again).  Meanwhile, this puts Donald Trump only 12% behind Obama for first-year market rallies and he only had to promise a $1.5Tn tax cut to get it.  George Bush I also beat Trump – and that guy wasn't even trying!  

Obama's rally peaked out on Jan 19th, 2010 at 1,150 on the S&P and then we fell for a month – back to 1,050 (10%) but then we rallied to 1,200 (April) but then we fell to 1,050 again (July) in a very exciting second year.  Of course, those consolidation waves set the base for the next 1,200 points and then Trump took over we're up another 600 but, of course, Trump is taking credit for the whole 3,222-day rally – even though he's only been President for 10% of it.

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Notice the Clinton Rally lasted 4,494 days and was much, much bigger (582%) than our rally (301%) and yes, it was pure lunacy at the end of the dot.com boom but this is the no tax boom and crypto-idiocy boom and 2,000 lie boom – all rolled into one.  Sure, in a few years, we'll look back at this rally and say "What were those idiots thinking?" and we'll forget "those idiots" were us and yes, I'm including myself because, despite warning you to be cautious, we put 20% of our CASH!!! back to work this month in our brand new Member Portfolios.

(image) FOMO (Fear of Missing Out) is what drives the markets and, if we are on the way to a Clintonesque 100% additional gain from here (Dow 50,000?), then we'd feel like real idiots missing out on that rally, even if there is "no inflation" – according to the Fed.  As you can see from the Relative Strength Indicator – since 1960, we have never been this "strong" in the market and forget the fact that all those peaks ended
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Fantastic Friday – Greetings from the Top to all you S-Hole Countries!

Fri, 12 Jan 2018 13:30:26 +0000

(image) What a great start to the year!

The S&P 500 is up from 2,680 to 2,770 so 90 points is 3.3% and our Long-Term Portfolio is already up 4.4% or $21,755 in 8 days of trading.  As you can see, we still have all of our cash on the sidelines as the well-hedged positions we picked up have been cash-positive for us so far – we haven't been confident enough to take big risks yet.  Our $100,000 Options Opportunity Portfolio, which you can follow at Seeking Alpha, is only up 3.3% because we're down $900 on our TZA hedge while, in the $500,000 LTP, CASH!!! is still our primary hedge against a market collapse.  

Our goal is not to "beat" the market on the way up, our goal is to kick the market's ass on the way down or if the market is flat.  By capturing all the good stuff and avoiding all the bad stuff, we can consistently outperform the market year after year without suffering the portflio-killing pullbacks that plague more aggressive traders.  While it's fun to brag about making outsized returns during these market bubbles – it's more fun to "Get Rich Slowly" and retire with plenty of money, isn't it?  

(image) The key to building wealthy over time is CONSISTENCY.  Warren Buffett's Berkshire Hathaway has "only" averaged 16% returns but he's been doing it for 50 years, allowing his initial investors to make 10,000 x returns on their invesments.  

But that's not the way it starts.  It starts in year one with a 16% return and $100,000 becomes $116,000 and then $116,000 becomes $134,000 which becomes $156,000 in year 3 and then $181,000 after 4 years and finally, in year 5, you get to say you've doubled up.  While it may seem like you'll never get to $1Bn in 50 years at that pace – the math doesn't lie – you just need to learn how to CONSISTENTLY make good returns.  

And, of course, anyone who says they have a better system is LYING to you because, after 50 years of measuring, no investor on this planet is richer than Warren Buffett so it's Warren Buffett's model we pursue, picking up good stocks at good prices and building
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