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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: Wed, 21 Feb 2018 03:04:09 +0000

 



Tumblin’ Tuesday – Thursday and Friday’s Low-Volume Gains Erased at the Open

Tue, 20 Feb 2018 13:21:30 +0000

You can't say we didn't tell you so.   In Friday's report I said: "We're now only 5% below the "obviously overbought" market top.  What changed in the past 7 days?…  The reason I'm skeptical of the rally is that we've bounced back on 1/3 the volume at which we sold off and forming a weak base is why we were shorting the market in the first place a few weaks ago.  Apparently, traders have learned nothing at all this month and we're right back to the madness of the Dow moving up 1,500 points on ridiculously low volume.  This is simply a lack of sellers at the moment and God help us all if they come back!"  Fortunately, we also followed through with our hedges and went into the weekend with a bearish tilt to our portfolios – locking in last week's silly gains. Even better, of course, were the Futures Trade Ideas we featured in Friday morning's Report, in which I said:  "As I noted in yesterday's Report, we amped up our hedges into the weekend and, this morning, I put out a note to our Members saying": /YM is 25,300, that's my favorite short and we have /ES 2,740, /NQ 6,845 and /TF1,545 and my stop-outs are if we get over 2,750, 6,850 or 1,550 but, otherwise, I want to accumulate /YM shorts.   As you can see, we already had a nice $4,385 gain on the /YM shorts by 1:15 on Friday – not bad for 4 hours' work!  After that we were able to rely on our index hedges to protect us and, into the close, we addred the following trade idea for the Russell Ultra-Short (TZA): I'd go TZA July $11 ($2)/15 (0.90) for $1.10 you get $5 in protection and it's almost $1 in the money to start.   TZA closed Friday at $11.84 and is should still be a playable hedge this morning if you think your portfolio is too vunerable.  A $3.14 gain in TZA would be 26% and, since TZA is a 3x short for the Russell, that would mean a 9% dip in the Russell should correspond to…[...]



50 DMA Friday – S&P Struggles to Stay Technically Positive

Fri, 16 Feb 2018 13:30:26 +0000

(image) Is overbought the right price now?  

Just a week ago, there were literally thousands of articles saying: "Well, of course we had a sell-off, the markets were so overbought it was bound to happen." Yet here we are, a week later and now they are saying what a great buying opportunity this is.  Seriously?  We're now only 5% below the "obviously overbought" market top.  What changed in the past 7 days?

The market has gone nuts since August, rising from S&P 2,400 to 2,872, which is a 20% run in 5 months.  Markets don't go up 20% a year, let alone in 5 months.  Hell, they hardly even go up 20% in two years and, of course, the logic is TAX CUTS – which seems to justify everything but let's consider that very few companies drop more than 20% to the bottom line (14.6% is the average) and that they are taxed on their profits, not their income so, even if the taxes were as much as the profits (they are about 20% of profits on average) and the taxes were eliminated ENTIRELY, then the companies would only make 14.6% more money.  

That is, of course, not the case and there is nothing in Q1's earnings or guidance to give any indication that the new tax law will have a serious effect on forward earnings – mainly because US Corporations never paid 20% taxes in the first place (about 13.5% on average).  So, if they actually paid the new 20% rate, it would be a tax INCREASE for those companies who routinely park their cash overseas or pay tens of millions of Dollars to accounting firms and Investment Banks to avoid paying Billions in taxes (Apple alone is bringing back over $200Bn they had stashed overseas).  

Trump is taking credit for repatriating funds from overseas but what he's really doing is giving companies a tax incentive (15%) for bringing back money they earned under the Obama Administration (because he was mean and would have taxed them) and for not paying their taxes under Obama's budgets.  In fact, Trump is REWARDING the corporations for hiding money from Democrats and letting future CEOs know that any time a Democrat tries to tax them – they are free to flaunt the law until a Republican is…
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Thrilling Thursday – Yesterday’s Russell Futures Up $2,500 Per Contract!

Thu, 15 Feb 2018 13:28:39 +0000

(image) You're welcome!  

In yesterday's Morning Report, we decided the sell-off was overdone and went for the Russell (/TF) Futures longs at 1,480 and yesterday afternoon they blasted back to 1,520 for a $2,000 per contract gain on the day and this morning at 1,530 for another $500 per contract and NOW we are flipping short – but more on that later.  Remember, we are still playing the bounce lines from the charts we made for your last week – so none of this is a surprise and none of this, so far, including this morning's pop in the Futures, is indicating a true recovery yet.  

The S&P Futures (/ES) this morning are topping out at 2,720 and our 5% Rule™ Bounce Chart from last week (2/9) has, so far, predicted the moves perfectly:

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All we are doing, so far, is topping out at the same place we bounced on 2/7 and that's being mirrored on the other indexes so the lines we need to be over now – in order to call today "bullish" are Dow 25,200, S&P 2,715, Nasdaq 6,700 and Russell 1,520 and, so far, the Russell and Nasdaq are a bit over but the Dow and S&P are below.  Don't forget, we topped out at 2,872 on Jan 26th so there's really nothing impressive about 2,720 - other than the fact that we came back from 2,600 but it's only a halfway recovery (not even) at this point and, if we fail to get over these lines, it's as likely we're consolidating for a move down after 2 weeks as it is we're moving back up.

Fundamentally, nothing has changed and you saw how quickly the market can still move down (and recover) yesterday.  Our 5% Rule™ takes into account that it's easy to manipulate a rally that recovers 20% and 40% of a drop if it's done quickly enough and we take into account the idiocy of dip buyers as well.  Not that all dip buyers are idiots – we had a field day adding stocks to our portfolios over the past two weeks – it's just that we added well-hedged positions and now it is time to improve our hedges, many of which we
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Markets Get No Loving on Valentine’s Day Inflation Massacre

Wed, 14 Feb 2018 13:29:52 +0000

(image) Happy Valentine's Day!  

There's a massacre for the markets as we're down 300 points in a massive failure of the strong bounce lines which we predicted for you a week ago, which are:

  • Dow (/YM) 24,100 is weak and 24,700 is strong
  • S&P (/ES) 2,610 is weak and 2,670 is strong
  • Nasdaq (/NQ) 6,440 is weak and 6,580 is strong
  • Russell (/TF) 1,480 is weak and 1,510 is strong

We needed to see strong bounces on all 4 indexes taken AND HELD for at least a full day before we could safely say the correction is over (it's not).  

Strong inflation numbers are killing us this morning (CPI), keeping the Fed on the table for more tightening.  There had been no real news in the past week to change what were obviously overbought conditions 2 weeks ago so there was no logic in racing back to the overbought conditions – though we're still a good 5% below the highs.  If you almost had a heart attack last week, this is a good time to consider hedges and a great example can be found from the way we adjusted our Money Talk Portfolio (which we discussed on Feb 1st in our Morning Report) by adding a Nasdaq Ultra-Short (SQQQ) hedge that has gained $5,900 in two weeks, almost exactly offsetting half the damage to the portfolio – as intended.  That trade idea was:

SQQQ is the ultra-short Nasdaq ETF that's a 3x inverse of QQQ.  So, if the Nasdaq drops 10%, SQQQ goes up 30% (in theory, it's not perfect).  I'm going to add the following trade as a hedge and WE EXPECT TO LOSE MONEY ON THIS ONE – it's like life insurance, you pay for it but you hope that, each year, it's a waste of money!  

  • Buy


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