Irrational Exuberance | Podcast Episode #199

0:07
Hey, I’m Ryan Mallory, and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex, ever changing world of finance. Learn what it means to trade profitably and consistently, managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

0:25
You can succeed at the stock market, and I’m ready to show you how. Hey everybody, this is Ryan Mallory with Swing Trade in the stock market, and today’s episode we’re gonna talk about with this uber bubble that we’re in right now, whether or not you should be liquidating your portfolio, whether or not you should say, you know what, I’m ready to get out.

0:45
The market’s too high, I can’t keep this up forever. I want to get out near or at the top. Let’s go ahead, sell everything I got, sell the long term positions. Let’s get out of this thing and try to buy stocks at a lower price. So, today’s email comes from a guy we’re gonna call him Huck and as always with these emails, we don’t actually give their real names out.

1:06
I actually just refer to them as a good old Florida redneck name, being that I’m from Florida, grew up country. I like to give a good Florida redneck name. Also, be sure to check out swingtradingthestockmarket.com. That’s gonna be where you get all of my market research each and every day. That’s going to include analysis on the S&P 500, Nasdaq 100, Russell 2000, as well as all the FAC stocks, including Microsoft and Tesla each week.

1:30
Plus you’re going to get my master watch list updates and you’re going to get my daily list of stocks that I’m watching each and every day from a potential trading standpoint and the most intriguing charts that I come across each day. So, check that out. swingtradingthestockmarket.com and in the process you’re supporting.

1:46
This podcast. Hook writes, Hey, Ryan, my name is Huck from North Carolina, Locust, North Carolina, to be exact, with today’s crazy markets and the Federal Reserve inflating the market, is now a good time to liquidate some long-term positions in order to avoid the inevitable crash?

2:03
Good question, heavy question, not a question that we all like to talk about, but around every corner of a bull market, there is an eventual pullback or I hate to say it, but sometimes there is a market crash too. But before I get into that question, what am I drinking? I am drinking.

2:20
Zachariah Harris, Kentucky Straight bourbon. Is it good? Uh, it’s, it’s a little thin. It’s only like $18 for an entire handle, so I mean, you’re not gonna get much cheaper than that. So if you’re on a budget. Probably not the worst choice in the world.

2:36
I can taste some like some coconut flavors to it. It’s thin, it’s not got a lot of depth to it, so I’m not overly crazy about this particular bourbon. I wouldn’t go out and get it now if I thought, look, I’m gonna be serving a party to a couple 100 people, would I go get some?

2:54
Probably so. That would probably be a good choice for a, a large party. I mean, I’m not gonna be serving Blanton’s, that’s for sure. But yeah, it’s thin, it lacks depth, has a little bit of a coconut flavor to it. I can’t give it more than a 5.1, and I feel like I’m probably being generous in doing so.

3:12
I think it could be an everyday sipper for the beginner or person that’s just trying to get used to bourbon. It’s a 40% alcohol, 80 proof bottle. You’re getting a full handle. When you buy one of these. So that’s, that’s a lot in terms of quantity for like an 18 $18 price at total wine.

3:31
So pretty good in that respect. But again, I’m not gonna be drinking this one every night. Can’t give it more than a 5.1. I think that’s kind of generous, but it’s about as high as I can go. Now before you get around to saying, hey, I’m going to go ahead and liquidate my long term positions.

3:47
Market can’t go any higher. This is getting ridiculous. Feds inflating the market valid arguments, but is it necessarily something that works with the stock market because so often people will get out of the stock market thinking it can’t go any higher. I mean, you look at last year.

4:07
When we started rallying off of those lows, the whole economy was shut down. There was every reason to believe this market is not gonna be able to keep this rally going, and here we are almost 18 months later, and we’re still going. We’re right at the all-time highs, and we have rallied way beyond anything anybody expected us to be able to rally.

4:24
In fact, for the past year from November. So here in October, the market has been on a pretty impressive rally at least with the S&P 500. You can’t say the same about the Russell 2000, but the S&P 500 and the Nasdaq 100 has done pretty well. So just because you think that it’s gotten too high, just because you think the Fed’s inflating the market, there’s been so many times.

4:42
In my trading career where I thought the same exact thing and if you get out of the stock market, when you start to think that often times it’ll keep running higher and further than you could ever imagine. Do I think that we’re closer to a top than we are to a bottom? Yes. I think that we’re probably in the 7th, 8th, or 9th inning.

4:58
I’m not sure, but we’re definitely. Throwing some relief pitchers out there to keep this market rally going. With that being said, I don’t know if this market rally won’t go into extra innings, and if it does, I’d like to be a part of it as much as possible. Now, if you’re buying stocks long term for retirement, then you don’t want to start changing your time frame just because of the market as a whole.

5:18
If this is something that you want to hold 40 or 50 years, that’s fine. Now if it’s a speculative stock, let’s say. You’re getting into the cannabis stocks or if you’re getting into some of these EV speculative plays like plug or Neo, yes, they may work out long term, but sometimes when you’re getting caught up in the moment of what’s popular and everything, it’s hard to make long-term trades out of those kinds of stocks.

5:40
So you gotta keep that in perspective. Now, if it’s a stock like Home Depot that you’ve held since 1980. Oh, well, you know, that’s gonna be a hard one to go ahead and liquidate just because you think right now we’re at a long term top and also if it’s paying dividends, you gotta think about what kind of return are you getting on your original investment for those dividends and if you’re reinvesting those dividends even better because your returns are just gonna be phenomenal, you’re getting dividends that you will never hardly be able to duplicate ever again unless we get another big significant market crash.

6:10
So you wanna keep all those things in mind. If I’m holding a stock for retirement, I’m gonna hold a stock for retirement. That’s a long term investment. That’s not a swing trade, that’s not a day trade. Now if I’ve initiated a long term investment in this past year, where the market has been on this impressive rally off of the COVID lows, OK, it’s gonna be hard not to consider that maybe starting a long term position more towards the top than a bottom and so if you start liquidating positions there, I get it, but if you, if you got in at the COVID lows, that’s, that’s a pretty good place to get long on some trades.

6:44
If you got back in long on the 2018 sell-off in quarter 4. You’re sitting on some impressive gains right there as well. And that pertains more to like your individual trades like if you’re a long-term Apple holder or a long-term Microsoft holder, but let’s say you’re in the S&P 500 and you’ve held on to it for a few years or even let’s say you’ve held on to it going back to like 2008, 2009 following the big great recession.

7:10
And so now you’re starting to say to yourself, OK, we might be getting into a correction mode here. The S&P 500 bottomed out in 2009, I think it was March 9th of 2009 at 666. I know that’s crazy to say that’s where we actually bottomed out at, but 666 is where the S&P 500 bottomed out at, and now we’re trading in the 4,000s here at over 4500.

7:32
So you’re sitting on some pretty good gains there. You’ve actually withstood a lot of sell-offs and corrections like some of the ones that I already mentioned. And if you’re starting to get leery of where this market’s at. And whether or not it can sustain its gains again, it’s not about trying to get in at the 2009 lows and sell at the 2021 highs this year marks the highs in the market.

7:54
It’s about getting the meat and potatoes. So maybe the market bottomed out at 666 back in 2009, but you got in at around 1000 on the S&P 500 and then saw it rally up until now, up until the 4500s.

8:10
Now you’re trying to say to yourself, OK. I don’t need to necessarily get out at the all-time highs, but what I do want to do is get the meat and potatoes of the trade. So maybe that means if we drop back below 3800 or if we drop below the 200 day moving average or we drop below 3700, you’re still walking away with the lion’s shares of gains.

8:29
There’s nothing to hang your head about. That’s a phenomenal long term investment. But it’s about drawing a line and saying, where are you not willing to let this stock drop any further before you go ahead and cash in those long-term profits? And again, if you’re planning on holding it to retirement, then.

8:45
Sometimes there’s there’s a lot to be said about following what your original plan was for the market, but if you draw that line in the sand and that line in the sand does get crossed and the market continues to sink, it does afford you another opportunity to perhaps get in lower. Maybe your line in the sand is like $3800 and the S&P 500 corrects all the way back down to 2800.

9:05
OK, cool. You just got back in at 2800 and maybe you can get another 10 to 11 year run out of the market before you had to sell it a second time. But instead of trying to get out of the top or saying at this moment where the market is just below all-time highs, maybe like 1 or 2% below all-time highs, saying, OK, this is too high, I need to get out.

9:24
You may be forfeiting a lot more gains down the road. Maybe this rally lasts another 3 or 4 years. I can’t see that happening, but again, maybe we go into those extra innings like I was using with that baseball illustration and we go a lot longer than you would expect. We go beyond those 9 innings. And if so, let’s try to capture some of those gains.

9:43
That’s more of the meat and potatoes and that you don’t want to leave on the table. I’m not big on trying to start long term positions right now. I don’t think that this is a market that affords you with a lot of opportunities. Most stocks right now are priced for perfection.

9:59
You have stocks trading at incredible multiples as if every stock in the S&P 500 is supposed to become a $1 trillion dollar stock one day. But where you really wanna target. Your new long-term positions is when the S&P 500 does in fact crash. When it crashes, it hits extreme lows.

10:16
A lot of times I’ll use the T2107 indicator on the TC 2000 trading platform, and what that does is that gives me an idea of how many stocks are traded below their 40 day moving average. When I start seeing it get down to like 2 or 3%. A total stocks trading above their 40 day moving average.

10:34
That’s where you’re getting into extremes and some what sometimes we jokingly call it generational bottoms. But in all seriousness though, those are sometimes the best bottoms that you’ll ever get into in your trading career. Some that happened for me was 2008. That was a really good opportunity that I was able to get some long-term positions on.

10:52
The 2020 Kovalos was an outstanding opportunity to get some additional long positions on as well. And if you seize those moments and you’re using some of those indicators that will tell you when the market’s getting extremely overbought, maybe you don’t time it perfectly, maybe you don’t get right in at the bottom.

11:09
But you are gonna get those meat and potatoes. The other question too for yourself that you need to ask is, are these dividend stocks that I’m playing? Am I looking to play these stocks for long term growth, or am I really trying to collect on like a 7 or 8% dividend?

11:24
Like, for instance, AT&T right now is paying an 8% dividend. Has the stock done anything over the last 10 years? Not really. It sucks. But if you bought the stock for some dividends that you’re going to collect over the long term, that might be a good one to hold on to. That’s not really a stock that you’re trying to get out of because you think there’s a market top.

11:42
You’re trying to just collect the dividends. I have some AT&T and I collect the dividends. I’m not in that stock long term because I think that it’s a good long term growth play. I just want that 8% dividend. And it has consistently paid that dividend out. Now, you also have stocks like Chevron and ExxonMobil that will at times when the price of oil is going through the roof, they will make their own runs as well.

12:05
But for the most part, you’re buying ExxonMobil and Chevron for their dividends too. Now, the other thing too about long term positions, it doesn’t mean that every stock that you invest in needs to be held for the long term because some of your long term plays are not going to play out well. The ones that usually do work out well is when you know that they have a history of good solid growth like Apple.

12:26
When you get that big pullback like what you saw in 2008 or 2018 or in 2020, those can be some really good opportunities to buy the dip on those long-term employees. But then if you’re trying to make a long term play out of, you know, some cannabis stock. Or like I said, it’s like an EV play, it may be not the worst thing in the world if you’re sitting on a little bit of profits to go ahead and book some of those profits once that line in the sand is crossed.

12:52
So essentially what I’m trying to say here is that and this is to wrap up the podcast and it’s a little bit on the shorter side of podcasts. What is your time frame? What are you investing in? Are you investing in dividends then, then really you, you need to keep collecting those dividends unless you think that there’s a reason that they’re going to start cutting their dividends.

13:08
On the blue chip side, if it’s a blue chip stock, and you’re wanting to hold the stock into retirement and you got in at a really, really good price. And continue to follow the time frame for what you got in. Maybe you add a little bit more to that long term investment.

13:24
If you’re in some of these ETFs like SPY or QQQ, maybe that’s a good opportunity to draw that line in the sand saying, OK, if it crosses this level here, I’m going to get completely out and I’m going to wait for it to drop down even further and then I will get back into it.

13:41
But have that line in the sand, it’s basically like a long term stop loss. Make sure that you always capitalize on the crashes. When the market crashes, those are the best times for some of the best positions and trades that you’ll ever create for yourself, and they can make you some of the most money, but use some of the indicators like the T2107 that TC 2000 provides, providing you with the percentage of stocks trading above their 40 day moving average.

14:05
When they get down to like 2 to 3% range, you know that things are starting to really get good in terms of trying to establish a new long-term position. And again, Go for the meat and potatoes on like your ETS and stuff if it’s a long term position in a stock like Apple, it doesn’t hurt to take some profits, I suppose, but for the most part, if you’re in a really good position and it’s paying some dividends or if it’s just a really rock solid trade that you made and you don’t see yourself selling it for another 20 years, then maybe you stay in that and you just ride through some of the rougher times.

14:36
If you enjoyed this episode, please make sure. To leave a 5-star review, those helped me out dramatically. Also, make sure to check out swingtradingthestockmarket.com where you can get all of my swing trading ideas and research, plus keep sending me your emails, ryan@shareplanner.com. This podcast thrives off of them.

14:53
Most people will get their questions answered, so make sure to keep sending them to me so I can go ahead and put them into a podcast episode of their own. Thank you guys. God bless. Thanks for listening to my podcast, Swing Trading the stock market. I’d like to encourage you to join me in the SharePlanner trading block where I navigate the stock market each day with traders from around the world.

15:17
With your membership, you will get a seven-day trial and access to my trading room, including alerts via text, email. And WhatsApp. So go ahead, sign up by going to shareplanner.com/tradingblock. That’s www.shareplanner.com/trading-block, and follow me on SharePlanner’s Twitter, Instagram, and Facebook where I provide unique market and trading information every day.

15:38
If you have any questions, please feel free to email me at ryan@shareplanner.com. All the best to you and I look forward to trading with you soon.