Missed Market Rally | Podcast Episode #376

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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.

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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.

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You can succeed at the stock market, and I’m ready to show you how. Hey, everybody, this is Ryan Mallory with Swing Trading the Stock Market.

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And today’s episode we’re going to talk about a missed market rally, now NASDAQ over the last 11 or so days.

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Over the last two weeks, let’s just say up about 10%. That’s a big freaking rally and it was a very easy one to miss.

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So what if you missed it? What do you do?

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In today’s e-mail, we’re going to talk exactly about that. Now, I don’t use people’s real names for the sake of the fact that 10 years from now they might not want their name to be used.

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So instead I use, or a tribute to them, a Florida redneck name.

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Today’s Florida redneck name is going to be Jedediah, Jedediah writes. Hi Ryan.

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I’m reaching out today with a mix of frustration and a bit of desperation. I’ve been a loyal follower of your podcast and right now I’m in the need of some of your insight on this market.

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So here’s my story.

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I completely missed the boat on the stock market rally that kicked off on October 27th, 2023. Watching this ongoing surge, I’m kicking myself for being on the sidelines during a massive 10% market rally.

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It’s like a punch in the gut.

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Every time I look at the charts now, I’m in this tricky spot. I’m super weary of jumping in now because everything screams over bought to me.

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The last thing I want to do is be the sucker who buys at the top right before things swing the other way.

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But sitting back and doing nothing feels just as bad. Ryan, what would you do in this scenario?

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I’m trying to navigate these waters without letting my frustration cloud my judgment, but it’s tough.

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Any advice on how to handle this market without getting burned or missing out even more? Thanks again for being so helpful in this crazy market.

2:09
Best regards, Jedediah. So there’s a lot to talk about here because I can relate a lot to what this person is going through in relation to this market rally.

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And the first thing that I would say is that you’re not going to catch every stock market rally.

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You’re just not. There’s going to be plenty of market rallies that you miss out on in life and one that lasts 2 weeks.

2:31
It’s not going to be life defining the market.

2:34
I’ve been selling off for about close to about 3 months. There was a top in July and then it sold off up until about two weeks ago.

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And then we’re getting this crazy market rally. It’s blown my mind how much it’s rallied in 10 days.

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Not that I thought it was impossible for it to do that. I’ve seen crazy rallies before.

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I’ve seen the market rally almost 10% in one day. You go back to like 2018, late December, just after Christmas.

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I think it might have been the day after Christmas. Most people were still trying to get the presents off of the floor, you know, throw away the old presents from last year.

3:01
But during that time the market hit a bottom and just screamed higher.

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That was a big market move. But what we saw here were, yes, the market has been selling for three months, but it wasn’t what you would call a cataclysmic sell off.

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It wasn’t even a full market correction.

3:16
And a market correction is what, 10%? We didn’t even get that far.

3:20
And yet what we see now, the NASDAQ and to a lesser extent out of the S&P, has been just an incredible scorching rally.

3:26
But if you look at the Russell 2000, it’s completely different.

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It bounced on this past Friday, but that was it. The Russell has been completely left behind.

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Why is that? Because you have Fang stocks.

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And when I refer to the Fang stocks, I’m talking about essentially Meta, Apple, Amazon, Netflix, NVIDIA, Google, Microsoft and Tesla.

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Those stocks, those stocks are pushing the whole market higher. They’re the reason for the market rally.

3:49
The breadth hasn’t been that great. But you look at the returns of the NASDAQ, why is it up so much relative to the S&P 500?

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Because those stocks represent a much bigger percentage of the total market cap of the NASDAQ 100. And to a lesser extent, there’s it’s still a huge presence on the S&P 500, but it’s still a lesser extent than it is on the NASDAQ 100.

4:05
It hasn’t.

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So the S&P 500 hasn’t moved up as much, but it still has moved up a great deal. And then you got the Russell 2000, which hasn’t even got the engines started, Really.

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Why is that? Because they have none of the big tech stocks in that index.

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So they’re going to be trading without that heavy influence of where everybody and this is what everybody’s doing these days.

4:24
Instead of the traditional market where people get nervous about the market, they’re dumping their money into utilities, staples, and to a lesser degree like real estate stocks or riots.

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Everybody’s dumping their money into big tech.

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But these are the biggest companies out there. So if you get those stocks to rally, it’s going to lift the whole market almost like we’re not even having a sell off.

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It’s like circular logic. It really doesn’t make too much sense.

4:45
But that’s really what most of these big Wall Street firms are doing. In fact, I’ve heard from people that are essentially they’re not allowed to buy anything else.

4:51
That’s all they’re allowed to buy. And really Wall Street, and this is what Wall Street does, They overplay their hand on everything.

4:58
We always want to act like, oh, the Street is smart at what they’re doing. No, they’re by and large they’re morons.

5:03
The analysts morons look at how they predict they have all the tools in the world, How off they’re on GDP, on jobless claims, on employment, on CPI.

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They miss everything, especially on earnings.

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So I often wonder if there’s not this coordinated effort to lowball all of these big tech companies in their earnings so that they’re always outperforming the estimates.

5:26
Now that’s me starting to put on a little bit of conspiracy hat there. But essentially what I’m trying to say is I have no respect for Wall Street.

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I don’t think that they’re very good at what they do. They look right because they have trillions of dollars at their disposal.

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They have your money and and grandpa’s money and and everybody else that inputs their trust in them. So yeah, they get away with it, but they’re not that smart.

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So when they’re starting to overplay their hand with all these big tech stocks, it’s going to be very similar to what happened to dot com.

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Everybody was piling into the.com thinking that nothing could go wrong. NASDAQ drops 87% over the course of three years.

5:56
Microsoft drops over 80%. Then you can’t have it.

5:59
It can’t happen. Especially when they’re piling in this much.

6:01
Especially when you got Apple with declining revenues year over year. And yet people are still buying this thing and pushing it up to over a 30 PE.

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For those who don’t know what APE is, it’s a ratio for the price to earnings.

6:19
No, now it’s trading at a 30. They’re almost paying twice the amount for earnings than they would have like 5-6 years ago.

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And you got Tesla, you see all of the EV stocks just completely plummeting. Yeah, see, Tesla’s taking a hit too.

6:31
They’re still trading at a 65 PE folks, and they want to get me started on NVIDIA. It’s in triple digits.

6:36
So how can you call those really safe havens when you’re paying such a premium for their earnings? In any case, where am I going with this?

6:46
I’m going off the rails talking about big tech, but I just wanted to give you essentially like a little bit of an insight into what’s going on in the market.

6:55
The reasoning for the rally, why we’re getting this rally, it’s really not on much news at all. It’s just a FOMO run where it’s people seeing other people buying.

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So they think they should be buying more people. See those people buying.

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So they’re buying and it just keeps going in. People are putting their money all into the big tech stocks and it lists everything.

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And I think I even saw reports where it said that retail for instance was as long as they’ve been since April of this year, so heavily long on the retail side as well.

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But I would tell you, and this goes back to my first point, that you’re not going to catch every market rally.

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And I would build on that by saying too that if this is the beginning of this major market rally, like we put in a bottom at the end of October of this year after the three month decline and this is the start of a brand new bull market rally, then what are you worried about missing the 1st 10% for?

7:46
Because if this is a brand new bull market, there’ll be plenty of opportunity to get long on it.

7:53
Yeah, there’ll be plenty of opportunity to get long on it. And you always hear me talk about don’t really go for the bottom or for the top of the market, go for the meat and potatoes.

7:59
You want to get the big chunk of the middle section.

8:02
That’s where you really want to extract your gains from. Folks trying to get in at the bottom, folks trying to get out at the top, that’s where they start to lose money.

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If you’re trying to short at the top or you’re trying to get long on the bottom, that’s where trying to step in front of the freight train, getting shorter, trying to catch the falling.

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Now if you get them long, that’s where you lose your money.

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But the middle section, that’s what you really want. That’s the good stuff.

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That’s the meat and potatoes. I say this because I have to tell myself that and let me tell you my story.

8:27
For the better part of October, I was short on the market. I played that bounce in early October.

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Maybe it goes back to like late September. Early October.

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I was playing the bounce there with like meta and Microsoft. Good trades, made a few bucks off of it and then the market started to reverse.

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Then I got into QIDI, got into PS:. Qi got into RWM.

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All good returns. But then not last week, but the week before when the FOMC statement came out.

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FOMC statement came out. I think it was November 1st on Wednesday, but the rally really started three days before that, on a Friday, October 27th.

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The market had been selling off heavy.

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Before that we were getting some huge candles to the downside. Then you start to get it like this candle as it was a green candle as a positive candle, but the closing price was lower than the opening price, which means people were fading stocks or fading the indices from the get go.

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And then the next two days, that was a Monday and Tuesday before the FOMC statement. You start to get a little bit more of a bounce, but I’m still in my short positions.

9:18
I’m still bearish because we hadn’t even broken through the five day moving average. It wasn’t until the Tuesday before the FMC statement where we were breaking above the five day moving average.

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Like it’s hard to get bullish on the market when you’re not even trading above a five day moving average.

9:30
If you’re not trading above the five day moving average, what are you getting bullish about?

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So finally the day before the FMC statement, we break above it. I go ahead and close out all my short exposure or my bearish exposure because it was really inverse ETFs.

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I wasn’t actually short, I was.

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I was long on ETFs that are inverse of the equities. Gosh, probably listening to that on a podcast can probably twist you up a little bit, right.

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But nonetheless, just know I was bearish. OK, so I was making money off of inverse ETS.

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Then you get the FOMC that comes out 2:00 PM two hours before the market closes. Doesn’t really do much.

10:02
It was kind of a nothing reaction to the FOMC statement. It wasn’t until the presser started at 2:30 and those go for like an hour.

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And during his presser, he will say all sorts of stuff that will cause the market sell off, cause it to rally.

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You can’t really trust those movements. At least I’ve never been able to trust them well and the essentially like the last hour of trade in the market just completely takes off.

10:18
Well, OK, kudos to the market.

10:22
I will go ahead and let it run its course for the remainder of the hour and then go ahead and look to see if the market wants to continue this rally in the days ahead where I can get along at.

10:32
Well, we had a freaking like almost like a 2% gap higher on the queues and then it keeps rallying. Then you get another gap the following day and it really never looked back.

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I mean you’ve had one down day ever since. And then that was quickly reversed just on Friday with a huge market reversal to the upside taking it even higher and now possibly even setting up to take out the highs of the year.

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But here’s the crazy part we’re talking about, you know, these massive gains in the overall market,

10:58
but you know, only four sectors are trading higher on the year 4. You’ve got tech, you got services, you got consumer staples, and you got industrials.

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That’s it. That’s all.

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You got communications, you got tech, you got discretionary, and you got industrial. Everything else blazing.

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Red. Utilities, down 14%.

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You got staples down 7 1/2%. You got real estate down 7%.

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You have financials, they’re down almost 1%. Materials down about 1/2 percent, but lots and lots of red.

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In this market, it’s all about the big tech stocks, every one of those sectors minus industrials are all benefiting from big tech.

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So wrapping up my story, I have not gotten along on this market at all, at all. I’ve been sitting in cash the whole time I I tried 1 short position, was profitable on it for the first day and then I got, you know, squeezed out of it the following day took like a 1 1/2 percent loss.

11:52
Moving on, That was it. That’s the only thing I’ve done.

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And yes, it is a very frustrating to sit there and you’re like holy cow, I can’t believe I missed out on the 10% run.

12:00
But like I said, I was talking about the five day moving average and then the FOC statement that came the following day that in that market run its course throughout that final hour of trading on the FOMC statement and then you get the massive gap higher.

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At that point it was really difficult to ever get long again because there was really no edge in doing so.

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The reward risk ratio was completely again, she the market’s already overbought at this point.

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Now it’s even more overbought. It’s screaming overbought.

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Like what? Jedediah says in this e-mail.

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12:46
That’s super cheap. swingtradingthestockmarket.com And so having missed out on the rally, I can relate a lot to Jedediah here because we’re pretty much in the same boat.

12:52
It doesn’t bother me all that much, but it does annoy me and I feel the annoyance because you’re like, man, there’s really no opportunity for me to get long.

12:59
Now some of you listening, it’s like, oh, there was plenty of opportunity, Whatever, you know, everybody has a different approach to swing training.

13:05
OK, So if you have a more aggressive approach, yes, there was opportunity for you to get in.

13:11
For me, I put a lot of emphasis, as most of you guys already know, on the risk aspect.

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So when the risk starts to get out of hand when the market starts to get too Curry to wait, yes, I’m gonna peel back some.

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I’m not gonna chase after.

13:24
So I’ll say this too If this is a dead cat bounce, Jedediah isn’t the perfect situation that you could ask to be in.

13:29
If it’s getting ready to top out here and we’re gonna reverse lower than being in 100% cash is ideal because now he has the flexibility to get bearish on this market.

13:37
Once it starts to pull back some. He’s not rushing to get out of his long positions and if there’s continuation to the upside and there’s more opportunity to buy getting long on this market, like I said, let’s say it goes on for two more years, then there’s not gonna be much to worry about having missed the 1st 10%.

13:52
If we’re gonna go up another 5060% here, there’s plenty of opportunity to profit off of that run. But the one thing you wanna make sure that you’re not doing is trying to make things right.

14:00
Saying to yourself, oh man, I missed out on the 1st 10%. I gotta get long now and try to squeeze as much money as I can out of the market.

14:07
I’m gonna get into some very heavy, volatile stocks. Maybe I’ll get into SPCE or I will get into Alibaba or buy things that are just absolutely bonkers to trade right now.

14:16
I’m going to go in and get into those because that gives me the best chance to make up the money really fast. If I’m right on that trade or I’m going to go into margin, I’m going to go, you know, 2X in the margin, then you’re really starting to put yourself in a bad position.

14:27
It’s OK to miss out on a rally.

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What’s not good is to take on unnecessary losses. And you’re putting yourself in that position to possibly lose big time.

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And you don’t want to do that as a trader. You want to stay in control.

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And so trying to make things right, trying to get back what you think you should have had by having participated in the rally earlier, only set you up for big mistakes, big losses.

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And you want to avoid that. You want to stay away from that mental breakdown that leads you to making big gambles, big bets that you may not ever recover from.

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And think about where we’re at right now.

15:01
I think this past week marked one year out from the next presidential cycle. Oh my gosh.

15:07
Got to love the commercials that are about to hit our Airways here from from both parties. But anyways, this isn’t to get political at all.

15:15
But if you look at our recent recessions, you go back 20 years. 23 years. Let’s go back 23 years.

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Most of your recessions happened one year out of a presidential election. Think about it, 2000.com bubble.

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When Clinton was president. That started when you’re out from George W Bush getting elected president.

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And then when George W Bush was president, you still had the nasdaq.com bubble, still trying to find a bottom in 2003.

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That was one year out from the reelection campaign that he had. It finally bottomed in 2003, but still that was like a year out.

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And then 2008, what did you have? You had the Great Recession took place.

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That took us all the way through March of 2009 when there was a new President Barack Obama.

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And then you take when Trump was president in 2020, you had the COVID recession that took place in March of 2020.

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You had a pretty nasty sell off for about 6 weeks. That was a recession as well.

16:10
So here we are again, 2024, we’re a year out from from another presidential election. There’s a very good chance based off of what we’ve seen in 2022 based off of what we’re seeing right now with interest rates, based off of what we’re seeing in the bond market and the rising yields and the fact that the Fed’s going to stay higher for longer, that we’re in the midst of another recession as well.

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So if you missed out on this market rally, it feels like you’ll miss out on it forever. I get that.

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It feels like that to me right now. I’m a human when it comes to trading.

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I feel the emotions as well. I just understand what those emotions probably mean more than others, just from an experience standpoint.

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But I know that the market will not go up forever, that there will be more pull backs, that there will be more opportunities.

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And you have to remember that when it comes to trading that you don’t want to force your hand.

16:45
Because I got to get long right here because I missed out on the rally. Forget about the rally.

16:48
Forget about it. Look at what price is doing right now.

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What does it tell you right now? Well, for me it tells me that it’s overbought.

16:53
I don’t want to get long on it right here. Even though I missed out on the move off of the October 27th, I don’t want to get long on it.

16:59
I’m more than happy to wait. I’m not losing money by doing this.

17:03
I’m setting up for the next move. That makes sense from a reward risk standpoint.

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So if you enjoyed this podcast, I would encourage you to leave me a 5 star review on whatever platform you’re listening to.

17:12
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17:15
I think you’ll like it. And I try to keep everybody in mind that there’s different approaches to the stock market all the time.

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So I’m always putting out there a lot of different ideas each and every morning, followed by reviews in the afternoon.

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It’s really good stuff.

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Plus, make sure to send me your questions. ryan@shareplanner.com.

17:33
I don’t get enough e-mail from you guys. I think some of you guys are bashful and I’m not just talking about guys, guys and gals.

17:38
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17:40
I want to hear what you have to say. Thank you guys and God bless.

17:45
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17:53
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18:00
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18:13
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