Markets of Rage | Podcast Episode #61

0:00
Markets of rage, that is what we have on our hands today. Hey everybody, Ryan Mallory with the Swing Trading the Stock Market podcast, new episode here. And I want to talk about it today and when I talk about it, I’m talking about a lot of the current events going on, but there’s a lot of long term applications and how you conduct yourself in these kinds of markets. So if you’re listening to this podcast a year from now or 2 years or even longer. What I’m talking about is the events that are unfolding here in August of 2019. And the date today actually is, is August 14th. So when I’m talking about the previous day or whatever, you can go back through your charts and see exactly what I’m talking about.

0:41
But right now, the S&P 500, it’s down over 2 percent. It is down a whole lot and it’s still printing new lows on the day. And let’s be honest, yesterday we had a magnificent rally. I was actually short when I came into the day. I turned my head for maybe a couple of minutes and all of a sudden I see the market just spiking out of nowhere. And I said to myself, I’m long SPXU, which is a 3 to 1 inverse ETF of the S&P 500.

1:03
I came into the day about 5 percent higher on the day. I look at it, I said, I’m out. You got headline news driving this market higher, you know, tariffs are gonna be pushed back till December. We’re going to take some items off the list. Market surges, everybody’s happy. We’re up about 45 points on the S&P 500 on that day. August 13th, everything looks fine and dandy.

1:15
And I get long two positions as well. I added Amazon, I added the stock, a software company called uh COUP. That’s the symbol. I finished pretty much flat in both of them. I mean, I was up a little bit in Amazon, down a little bit in COUP. And I thought, OK, we’re, I’m not really worried about if I’m up or not today. I’m looking at more of a multi day rally that’s going to be happening here because we got the news, the goalposts have been pushed back a little bit further.

1:53
There’s a good reason why we should rally over the next 3 or 4 days or throughout the rest of this week. I was pretty optimistic about it. I think a lot of people were. There was a lot of strength in the buying, that was another positive aspect of it. But I didn’t want to get too long too fast. I thought two positions, OK, that’s manageable. I’m not gonna be using a ton of capital. Let’s use that as the getting my toes wet kind of thing.

2:16
The market opens up higher and shows it wants to sustain the rally from the previous day, we’ll add another position. Guess what though? The exact opposite happened. I wake up this morning, I’m checking the futures down 35 points. I’m like, wow. And as I’m looking at it, I’m looking at some of these red bars print and it’s like going from 35 points down to 42 points down in seconds.

2:40
I’m thinking to myself, there is some panic in Wall Street today. And it’s not just because it’s down 35 points, it’s how quickly the moves are happening. And so here we are, we’re sitting at a situation that’s not really what I was expecting going into the day. I wasn’t expecting us to be gapping down this far, but I knew that there was something grossly wrong with the market today for it to be doing that.

2:53
So what did I do? I had to come up with a plan. I had to figure it out. I’m taking my shower in the morning and I’m thinking, OK, what am I gonna do? What’s gonna be my approach to this market? How am I going to tackle this because there’s a lot of volatility on the wrong side of the market after getting long on it the day prior, and now the market’s reversing.

3:12
I know COUP is going to take a hit, the market’s down this much. Amazon’s obviously taking a hit. The only thing that would save me would be like an upgrade or a buyout and definitely not getting a buyout of Amazon, but maybe COUP. But no, I’m not that lucky when it comes to trading.

3:23
So I go ahead and I concoct a game plan for what I was gonna do. Essentially, I’m selling Amazon at the market open. It’s going to be above my stop loss, so I’m not waiting for the stop losses to get hit. I’m not waiting for COUP to get hit. I get out. I have COUP, I get long at 138 yesterday. I have a stop loss at like 133.50.

3:50
I’m getting out at like 134.75 I think is where I got out at. Amazon, I had a stop loss at, I got in at 1823. I have a stop loss at 1876. I’m selling it at like 1794. So I’m preventing additional losses, but also on the flip side, I’m getting short on the market too, so I’m adding SPXU.

4:19
This is all being done within minutes of the open. Like 30 seconds to a minute of activity. I haven’t made any trades since then. So I do that, the S&P’s gapping down about 35 points at the market open. And now we’re looking at 71 points as of this moment as I was recording this.

4:30
Does that mean it can’t rally into the close? It could. It could have a dead cat bounce. We have yet to see a 30 minute bar on the S&P 500 finish green today or yesterday. So you take that, you’ve got 1 2 3 4 5 6 7 8 9 red bars in a row. There’s a lot of heavy selling. The volume buzz is really heavy.

4:53
So what do you do? We have markets of rage right now. We are positive on our SPXU trade. We took a hit on Amazon and COUP. That’s OK, that’s recovered. We kept the loss small. I’m still slightly positive on the month. That’s actually pretty cool because the market is way down. We were printing like 3000 at the end of July.

5:06
And now we’re sitting at 2855. So there is a lot of downside already being seen in the market this month. And quite honestly, I think we’re gonna probably hit these August lows again before it’s all said and done. And if we do that and we break them, then I think we’re gonna see a challenge of the 200 day moving average.

5:20
If that breaks, then I think you’re gonna see a break that could take us all the way down to the June lows. So this market doesn’t look good right now. It’s got its share of problems and worries. So what do you do? In this kind of market, you want to stay nimble. You don’t want to take on a lot of positions.

5:43
You want to be able to maintain flexibility. You don’t want to have convictions either. A lot of people think that convictions are a good thing. In a bear market, it’s really not because you can get some really crazy price action. Over the last 6 or 7 days on the S&P 500, the price action has been bonkers.

5:54
I’m looking at way down, big bounce up, gap down but a recovery into the close, followed by another gap higher, followed by a sell off, followed by an even further gap down, followed by a flat opening into a big major rally higher, and then a big gap down today. It’s basically down up up up down down up down.

6:25
And the moves are really big. So there’s no continuity. There’s no real rhythm. While the charts are bearish right now because of how big the downside has been today, it’s been very choppy over the last few days. So the biggest thing for me as a trader, what I would like to see is the market continue to sell off and break below the August lows.

6:40
Let’s really wipe out some prices here. Let’s flush out some of the longs. Let’s get some really good bottoms put into place and some really good bounce opportunities put into place. And let’s start trading this market to the upside. But right now, this bounce back and forth stuff that we’ve seen in the market a lot lately isn’t helping us get some really good bottoms put in place.

6:50
So I do think the market still has some downside to it. I thought we would probably get a couple day rally out of this market after yesterday’s news. That didn’t happen. The bears took over far quicker than I expected them to. So now I have to adjust my plan. You have to stay nimble. You can’t hold on to your convictions.

7:28
So my belief was that we would have a bounce. It didn’t happen. Do I hold on to that conviction saying, well, but we have to, this is what I believe, I’m gonna stick to what I believe? No, I can’t do that. I can’t do that at all. The market’s down, the market’s telling me what my conviction should be. Could we rally tomorrow? Yeah, yeah, we could. And then I gotta change. You can’t hold on to convictions in this market.

7:38
You gotta be willing to change. You gotta be willing to adapt. You can’t be a diehard about where you think the market’s going in the short term. And that really goes for any market. You really have to always be ready for change. Long term the market tends to go higher, right? Over a 3 or 4 year period, it can go lower. It doesn’t happen very much.

8:10
But over the long term, if you look at going back 100 years, the long term thesis is always going higher. If it doesn’t, we’ve got a huge problem in this country. Building upon not holding on to your convictions is the idea of hope not being an option in your trading. So today, I was waking up, the markets were flat when I went to bed, slightly positive actually.

8:20
I was waking up thinking that we’d probably see maybe 5 to 10 points to the upside. And so I was caught off guard. I thought we would see COUP maybe pop up another 1 to 2 percent today. I thought we’d see Amazon hit another 1 to 2 percent. It would be a nice steady build upon yesterday’s new positions that I added, but that didn’t happen.

8:47
Now, I sold both of them immediately at the open. However, if I had been holding on to hope as an option, if I were to put my hope that these things maybe, maybe they’ll do something different, maybe they’ll buck the trend, maybe the market will reverse right at the open and we’ll go hard. If I had done that, I’d have been stopped out of these positions way lower.

9:01
And if I wasn’t using stop losses, oh my gosh, I would be down big time on COUP, which is currently down 6.28 percent on the trade itself. I only took a 2.5 percent loss on that trade. Amazon is down 3.2 percent. I would have already been way stopped out on that one had I not used stop losses. Instead of taking a 1 or 1.5 percent loss, I’d be down 3.2 percent on that trade.

9:35
So you can’t use hope as a reason for holding on to a trade in a bad market. You just can’t do it. Hope is not an option. And that brings me to my next point, and this follows on what I’ve already said. Follow your stops. Follow your stops, guys. I got out before my stops hit because I’ve been doing this long enough to realize that when you see a reversal like we saw yesterday and you can see the panic in the pre market, there’s a good chance your stops are not gonna last.

10:01
I was in the technology sector with COUP. I was in discretionary with Amazon. I knew those things weren’t probably going to hold for very long. I was right. However, not following your stops is one thing. Getting out early before your stops hit is one thing. But ignoring your stops in hopes that it will rebound is a bad move. Bad move, guys. Don’t do that. Follow your stops.

10:24
And then if you’re in doubt, don’t add any new positions in the market. If you’re just like, this market is overwhelming me, I have no idea what’s going on here, I don’t know what I’m supposed to be doing, don’t trade it. Just don’t do anything. That doesn’t mean that you don’t follow your stops and if they get hit, you get stopped out and take the loss. I’m not saying that. I’m saying don’t add any new positions.

10:49
Don’t add any more pain to your portfolio. Don’t add any more loose ends if you don’t have a strong understanding of what’s going on in the market. I did that a couple days ago. I really did not feel like I was on the right end of this market. The market rallied big time. It was up like 50 points. I didn’t get it. I really didn’t. I held off. I decided I’m not going to do anything.

11:03
I’m not gonna chase this rally. And it turned out to be the right thing. If I had done that, I’d be losing on those long positions that I added. The reason why I added long positions yesterday was because I actually did have a pretty decent understanding of what I thought the market was going to do. Just because you have a decent understanding or an understanding of what you think the market should do doesn’t mean you’re holding onto convictions too hard.

11:25
And it definitely doesn’t mean that the market can’t make you look like a fool in the process. It just means that you’re trading with a plan, that you’re trading with an understanding of why you’re trading what you’re trading. You don’t just throw stuff against the wall and hope that it’ll stick. That’s not what you do.

11:49
When in doubt, you just don’t add any new positions. If you’re not sure what’s going on, if you feel like this is way over your pay grade, don’t mess with it. And know too, in these kinds of markets, emotions are gonna be high. People are going to be freaking out. People are not going to like this kind of stuff.

12:08
People get panicky because guess what? People love trading in the stock market. When I get people asking me about the stock market or saying hey, I’d like to get into a trade, I get it from friends all the time. When people want to get into trading, it’s always when the market’s at all time highs. It’s always when people are seeing everybody else talking about the market.

12:16
Being at all time highs or how much money they’ve made on Apple or Amazon or anything beyond meat, right? Oh gosh, that thing’s not holding up too well. Actually, it’s doing a little better than I thought it was, but it’s still been taking a lick lately. Finally, thank goodness, because we don’t need fake meat absorbing the headlines anymore.

12:40
But no, the emotions are going to be high. People are gonna be panicky. People are gonna be making bad trading decisions. The S&P is down about 70 points right now. If it goes down another 20 or 30 points and we’re hitting triple digits on the S&P 500, you’re gonna really see some people start to flip out.

12:51
You’ll see the bigger movements in price. And that’s one of the ways that I look for panickiness in the market, is when we’re seeing big 5 to 10 point clips happen within minutes where people are just selling in big massive lots and the street’s just getting out altogether. That’s a very good sign.

13:12
Remember this too, and I’ll leave you with this. The fewer positions that you trade in this kind of market is going to equal less stress and anxiety. If you’re thinking that you’ve got to buy the dip on 15 stocks right now, and you just start buying as many things as possible because the market is really low, and then the market keeps going lower, those 10 or 15 stocks you just bought the dip on are going to create a lot of anxiety for you.

13:24
It’s gonna create a lot of stress, because all of a sudden you’ve got all this capital committed and you’ve got all these positions and most of them are going down. Maybe one is giving you some hope that it might be bucking the trend, but overall, you’re losing a lot of money and it’s creating chaos in your mind. It’s creating anxiety.

13:34
You’re feeling stress. It’s probably creating depression too. I don’t know, depression and anxiety at the same time, who knows what that feels like. But for me, I always feel like the fewer positions the better because I can manage one position, I can manage two positions much easier in a very unpredictable or very chaotic trading environment.

14:05
But if I’m going balls to the walls and just adding as many positions as I can to the portfolio, I am going to create so much stress and so much anxiety for myself. And more than likely I’m gonna make a bad decision on every one of them. Every single one of them. So don’t do it. Fewer positions the better. Just remember that.

14:15
Don’t try to be a hero in these markets. I got one position open right now, one. SPXU. That’s the only thing I’m in right now. Tempted to add a short position on QQQ, yup, yup. Tempted to short Tractor Supply, TSCO, yeah, I definitely am. But guess what? I’m not gonna do it. I am not going to overload my portfolio with short positions.

14:43
But I may add another short position tomorrow. If I can see some follow through coming through on the market and some more panic, then I’ll consider adding another short position. Right now, SPXU, that’s what I’m in. Because I understand from my years of trading, even as a person who has traded since I was 11 years old, that the fewer positions you have in your portfolio is going to equal less stress and anxiety.

15:04
And you’re going to be able to think clearer too, because you’re not going to be overwhelmed with the fear of losing all your capital off some risky gamble that you just took. That’s gonna be it for today. If you have any questions, feel free to email me ryan at shareplanner.com, man.

15:26
Guys, the best place to be right now in these kinds of markets is the SharePlanner Trading Block. The Trading Block is the place to be. And it’s not because I’m the best trader God ever created. Now, I’m not gonna claim that. I’m a pretty good trader. I’m a really good trader actually, but the fact is you’re in a community of traders that are experiencing these ups and downs with you every single day.

15:35
And they’re going through it all with you as you’re going through it. People are asking questions and bouncing off ideas. People ask me, what do you think of AMD? What do you think of ZTS? Would you be buying here? Would you be buying this dip in the rallies? People are discussing this stuff and helping each other.

15:47
Yes, I put my swing trades out there in real time for everybody to see, to scrutinize, to agree, to disagree, whatever, to follow. That’s great. But the real gem is that it’s an active community of traders pushing through this market on a daily basis, just grinding it out.

16:11
So check it out. I hope to see you there. Thank you. God bless.