Stock Market Crash of 2020 | Podcast Episode #85

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 doing a new podcast episode, and it’s kind of stressful out there, isn’t It’s? The coronavirus. You sick of hearing about that word yet? Sick of hearing about people talk about how they can’t find toilet paper?

0:44
People talking about how you should be washing your hands? I kind of am. I’m not discounting the fact that people are dying from the disease and that it’s spreading like wildfire right now. However, I don’t really think that it’s that big of a deal. I think it’s like the regular flu may be a little bit worse, maybe like some of the other strands that we’ve seen that that are that goes above and beyond the average flu case.

1:07
Yes, it’s going to hurt the older population. That’s what the flu does to me. This is just a huge overblown, quote UN quote, pandemic guys. It’s killing the stock market. It is absolutely killing it. When I got out of my shorts a couple weeks ago and I had decent gains in them, you know six 710%, I wasn’t expecting any more downside to this market.

1:32
I was like I got 200 points out of the S&P 500 in a few days and I’m like that’s great, welcome. Now we hit all time highs at 3393.52 I think is what it was and we’re trading at 2500 that’s like that’s a 27% decline off of the all time highs, a 27% decline.

1:56
We’re talking like 3 weeks. We talk about stock market crashes and how they kind of like live it, live as like myths in our minds. We think of 1987 to 2008, yes, some of us lived through those and traded through those. I I traded through the 2000.com bubble and the 9/11 and then the 2008 and then 2018 correction.

2:16
And let me tell you we’re living in one of those moments right now. We’re living in the moments where we’ll be talking about this moment here 10/15/20 years from now in our trading. Maybe I’ll still be trading by then. I don’t know. Maybe I’ll be retired. Hopefully. That’d be nice, right?

2:32
Wouldn’t have to worry about a future coronavirus outbreak or whatever they call it. Maybe it’ll be the Yuengling virus or the the Schoffenhofer virus. Maybe we’ll get the Jack Daniels virus. That would be kind of cool. And I know some of you guys you guys are probably taking it more serious than I am.

2:48
I’m not taking it serious. I’m really not. I I just if I get it, I get it. I’ll I’ll, I’ll take my meds and go on about my day. I’ll try not to get anybody infected. Not going to go on any cruises right now? No, not going to go on any cruises. Probably going to go on any airplanes.

3:04
Yeah. Last place I’d really want to be is an airplane. I’d probably rather be on a cruise than an airplane right now. Cruise. Yes. You’re on a boat with people for seven days. Dude, you are breathing the same air as everybody in a Dagum airplane. I don’t think I’d want to be on an airplane. Now, I’m not a science scientist on this stuff or anything else, but just seems like to me there’s somebody with coronavirus on the airplane.

3:23
I wouldn’t want to be breathing it. But anyways, I I really don’t think it’s that too big of a deal. I think you have a media that sensationalizes this stuff. It’s freaked out the markets, and because it’s in the in the markets are freaked out because it’s driving down the price of oil. It’s killing the travel industry. People aren’t moving around.

3:38
People aren’t consuming. Businesses are shutting down. Yeah, that’s going to freak out the market market careless what the coronavirus is. It cares what it does to the economy. But when everybody freaking loses their minds. So yeah, we have the S&P 500 end of the 11 year bull market who?

3:55
Who would have thought that would happen that quick? I mean look at the Dow. The Dow has lost like what, 8-9 thousand points off of its all time highs. I mean that’s some serious stuff. Serious S&P 527% off of its all time highs way more than what we saw October November and December of 2018.

4:13
And we we thought that was crazy. Just blows it away. So how do you how do you how do you approach this market right. You can’t you can’t go put all your chips in the middle. OK guys. I mean you can’t. I mean I’ve, I’ve gotten stopped out of a couple positions here in the past week or two and a couple of them for like slight profits and the others for for lot for just you know basically normal losses.

4:34
But here’s, here’s, here’s the big thing though still profitable on the year, I’m thrilled about that. I’m I went very heavy cash right now, I’m like 90% cash and maybe 100 at the end of the day, depending on how this market plays out. I’m not taking risks.

4:51
I can. I can take risks on one or two positions when the S&P 500 is falling like a rock. But I’m but those two positions represent like 10% cash. I’m trading to my comfort. Okay. I’m not trading 100% right now.

5:09
I’m not fully long. I’m not going margin. There’s idiots out there probably like saying I’m loading up the boat here. I’m going 110% margin and maybe, maybe it’ll work out for them, right? Maybe. Maybe today’s the bottom, I don’t know. But they are not trading to comfort if they’re doing that.

5:25
Unless they’re just trading like $1000 and they’re going $2000 Max. You have to trade to comfort. Guys got to trade to come, trade to comfort. You have to keep stocks. Know where your stop losses are before you get in. I have.

5:40
I put 2 new trades out there today. Apple and Google. Right put stops out there for each of them and if they get hit taken out, I’ll get out. The market doesn’t act like it wants to really run into the clothes here. If it doesn’t want to hold the the pop that we got from the Fed, I’ll go ahead and get out.

5:56
But I have that Peace of Mind right now. And here’s the other thing. We’re insanely oversold. Insanely. I never thought that I would probably ever see some of the readings that I’m seeing on indicators right now, the one that I like the best and this one is guided me through so many market corrections and has done a just a fabulous job, right.

6:17
It’s the T 2108 and what is that? That is going to measure the percentage of stocks trading above their forty day moving average. Right now, and I’m pulling this up for you, we are trading at 1.94.

6:38
We even hit 1.45 at one point today 1.4% of stocks are trading above their forty day moving average. Now to put that in perspective for you, the worst that it got in 2008 was 1.2. So basically we’re splitting hairs at this point with 2008.

6:57
I don’t I pretty much call that a tie. You get in the ones, it’s a tie. What was the 1987 Black Swan event like where the market lost like 22% in one day or something? It was like .47. What about the VIX? This is literally the highest reading on the VIX since 2008, 2008 it got up to like 90 or 90 and change in 1987 it got to like some crazy like 172.

7:23
I think if we started seeing a VIX moving that high and everything, I think the market would start shutting down due to the 20% level three circuit breaker. But we’re talking about some extreme extreme movements and these indicators here. Second third highest, third highest reading. I think I said second highest in the earlier in the podcast, but third highest reading outside of 1980, seven 2008. Nothing even like touches it way over. Way over what we saw in 2018. Like, almost double it. Right now the VIX reached a highest 69.26.

8:00
Some people will say, oh, the people, people aren’t scared of. The smart people are scared. When the volatility is at 69.26, that means there’s a lot of selling going on. OK. There’s a lot of selling. There’s a lot of panic selling. My cell phone has been lit up the last few days. People I haven’t talked to in 20 years, call me one in some financial advice.

8:16
First of all, I don’t give out financial advice. I tell you what, I’m trading a trick. Tell you how I’m approaching the stock market. I can’t tell you what to do. I can’t tell you how you should do it. I’m not going to handle your money for you. But what I will do is I’ll tell you how I approach the stock market. I manage the risk. If you manage the risk in these markets, you’re going to be OK.

8:34
But people don’t do it. They just want to put their money in the stock market and say, hey, whatever happens, happens, right? Market always goes back up. Yes, that’s true. Sometimes it takes 17 years, like the NASDAQ to come back up. You got 17 years to wait around. I don’t know. I don’t think it. Most people do.

8:50
I got people ask me, hey I’ve got this amount of money and and stocks and I got this much money and bonds. What do I do? What’s what, what should I do with that. I’m not going to tell you what to do. It’s not my job. I can’t tell you man. I mean everybody has different risk ratings. I mean personally I think I think if somebody is like waiting until a 27% sell off to make a decision what they should do with their their portfolio or actually considering at that point in time what to do with their portfolio, that’s a big mistake.

9:16
It’s either you’re writing it out or or you’re going to be active managers of it. The stock market’s always going to have these kinds of moments. So it’s always going to have massive sell offs. It’s like death and taxes. There’s always going to be a massive sell off. Granted the stock market’s going to have plenty of new first things that you’ve never seen before.

9:32
We’re seeing that right now. Quickest sell off from all time highs to a bear market ever since World War 2. I guess I can’t say ever in World War 2 in the same sentence. It’s the fastest sell off since World War 2. That’s Great Depression kind of moves.

9:47
Okay. 2008 took like over a year to play out. This is playing out in three weeks. Remember the boiling frog effect where it says you can boil a frog if you just slowly turn up the temperature, but if you just crank it up to high heat right away or you just throw it right into the boiling water, frogs going to jump right out.

10:05
So that’s what’s happened. You’re having a lot of people jump out here because they’re they’re they’re feeling the heat. They’re going from all time highs to all of a sudden, you know, their portfolios are just, you know, melting away. They’re seeing hundreds of thousands of dollars just like, you know, go to trash.

10:21
I feel for a man because so many people have been raised on the idea that the stock market, oh you know, if you stay in it long term, and usually that is the case, if you stay in it long term, you’ll be fine. That’s happened so far. I mean I can’t predict the future, but I mean I would assume that would be the case going forward.

10:36
However, when you’re in the midst of it, when you’re in the midst of these sell offs and you’re seeing $1,000,000 portfolio suddenly only worth $650,000 because you were in small caps or or maybe it’s worth even less. Yeah, you’re starting to wonder man, what I could have bought with that.

10:52
You start, you know, thinking about the dollars that have been lost. So we talked about the market, we’ve talked about trading to comfort and keeping your stops. But the other thing is don’t implode, live to trade another day, man. If your stomach can’t handle this and you’re trading guys, that’s that’s time to probably step back a little bit. Going back to the trading for comfort.

11:09
I’m living to trade for another day here. I got 10% of my money in stocks right now. If I get stopped out before the end of the day, it’s not a it’s not a big blow to My Portfolio being stopped out. If I was 110% long on these positions, I’d be sweating bullets right now with this market. Yeah, it may work out, but I don’t need that kind of stress in my life.

11:26
Trade to comfort, man. Don’t implode your position because you want to live to trade another day. The market one day will will go back up. There will be buying opportunities. Okay. As far as I know, nobody’s told me to the contrary. OK? You want to be able to live for that day. You don’t have to be the hero in your trading.

11:43
If I wanted to be the hero right now, my trading account, I would go all in. I’d go buy everything that I could, Max it all out, maybe going to margin. But heroes are not made in the stock market. It’s really the people who are just willing to manage the risk. Those are the real heroes, people who are willing to go only trade 10% or 5% or go complete cash.

12:03
Can you go short in this market? Yeah, you can. I mean gosh, if you’ve been short the last three weeks and there was, there was some great traders in our chat room in the trading block that have been that have been short. I wasn’t I I cleared out like a couple weeks ago and went mainly cash and kudos to them man.

12:18
I’m I’m so thrilled for them, OK because they made it some good trades and they’ve they’ve profited well. But, but here’s the thing, though, It’s like, at this point, why would I not get short? You got to fix it 70. You got the most oversold conditions outside of 1987.

12:36
Do I really want to test that? Do I really want to start getting short at these levels? No. Because while the market still may go down, maybe the market goes down another 4000 straight points before the end of next week or or the hell, what do I know? Maybe. Maybe the end of this week. OK. And if it does, sure.

12:52
OK. That was a short opportunity that I let go away. But the risk wasn’t working for me there that the risk is not going to be there. And we’re talking about trading to comfort, not trying to implode. I’m not going to go get into a new short position when the market has a VIX reading of almost 70 when we’re the most oversold that we’ve ever been.

13:08
You have to start looking to the long side in those situations. And here’s the thing, I don’t, I don’t necessarily believe that it once the stock market does bounce that it’s going to go back to all time highs. In fact, I I doubt that it will. But I do think that there’s going to be a moment there were the the bears are going to be who are short on the market when they’re going to be forced to cover their short positions and it’s going to be an epic rally.

13:28
It’s going to be monstrous because not because all of a sudden all is good coronavirus has gone away and people are stopping buying their toilet paper. It’s because the shorts are going to be so scared that they’re going to lose their profits that it’s just going to create a snowball’s effect. And honestly, I wouldn’t be surprised if you saw the S&P up as much as 300 points one day because of how much short covering that will take place.

13:48
The short covering is what leads to these massive bounces. I mean, the Fed comes out and and expands its repo purchases and guess what? The market moves like 160 points off the lows in like 10-15 minutes. Just imagine what’s going to happen when you get a legitimate bounce that can actually hold.

14:04
Yeah, you’re going to see a huge freaking rally. So I’m not going to go short. I’m not going to get caught holding the bag when that rally happens, when so many of the internals on this market you’re seeing like capitulation, where you’re getting readings of like 65 to one In terms of advancers, decliners usually like 13 or 14 to one is considered capitulation by historic standards.

14:28
No, you got 65 to one. If I pull it up right now, 81 stocks are going up 2961 stocks are going down on the NYSE right now that’s that’s insanity by historic standards. You never see that.

14:43
But price is yet to confirm what you’re seeing a lot on the internals and that’s the big problem. You’re oversold you’re the the volatility is like reached like critical mass but there’s no bounce. So you got to wait for you. Price has to confirm, right. That’s what you got to do and here’s the thing I don’t want to come across as being too hard.

15:00
I know a lot of you guys are going through some tough times. I I have one person tell me that they blew up their account and and that really breaks my heart. It really does like I the last thing, last thing I want. I mean I’ve I’ve been short the market when the markets going down and people are losing their shirts and everything in it, even though I’m making money at those times, it’s one of the least enjoyable moments for me in the stock market because what might be good for me it’s it’s so bad for so many other people and that’s not the situation here.

15:27
I’m pretty much all cash except for a couple positions that I’m tinkering with. To know that that’s going on, that that hurts, It doesn’t bother me so much. Like when a when a rich person loses like a $1,000,000 and he’s got a billion more to play with, that’s not going to bother me. Okay. But you know when a when a person, a hard working person, makes enough money to save to trade in the stock market and they they imploded and stuff, it breaks my heart.

15:49
So I’m I’m trying to give a little bit of tough love here. I’m trying to, you know, help you guys out. But here’s the thing. Don’t let this learning experience goes to waste. Don’t let this learning experience go to waste. There is things to learn from this.

16:05
There’s things for me to learn. I’m preaching at myself on some of this stuff. OK? I’m reminding myself, look, Ryan, trade according to your comfort. And that’s what I’m doing. But I have to constantly remind myself of that. I can’t let my emotions get out of check. OK? And I’m a I’m a person who does have emotions that feels anger and feels rage.

16:22
There’s people out there that says, oh, I don’t, I’m an emotionalist. Traitor. That’s bull. OK, people, people have emotions in their trading. It doesn’t matter who you are you’re going to feel it. Okay. That’s why I say trade. Trade to your comfort and these times you can’t really you should always trade according to your comfort. But you got to you got to be okay with what you’re trading, how much you’re trading and and and realize that like this too will pass.

16:45
People will get cured of these sniffles that are plaguing the the world right now. The sniffles will go away. And yeah, 4000 people have died. And. And but guess what, though? I mean, the flu takes a lot of people, you know, and it typically takes like your older population because they have like respiratory infections or whatever.

17:06
I’m really, if I, let’s say I came down with the coronavirus tomorrow, am I going to be nervous about it? No, not really. I mean, I might feel like a little weird because there’s only like, I don’t know, like 1000 people in the United States and I’m one of them. It’s like, why could I not had those odds in my favor with the lottery, right.

17:22
But, but I wouldn’t worry necessarily about like not making it, you know, so do I think, like you got to be canceling like the NBA, the NHL, the MLB seasons, not necessarily canceling but suspending them? No, I don’t think so. I mean eventually you’re going to get hotter weather and this stuff is probably going to go away anyways.

17:39
Be safe out there with your trading. If you’re not comfortable trading something, if it’s just too much to handle, you hear about that. You got to buy when everybody else is fearful and everything and these are fearful times. You know and there’s there’s there’s probably some buying opportunities there to be had. OK. A year from now we’ll probably be looking at these charts like man, I wish I would have bought such and such stock, you know, and but in the meantime you have to trade according to your comfort.

18:02
You can’t, you can’t implode yourself. You can’t do something that’s going to cause you to to just have an absolute meltdown. So where does this market go from here? Well if you haven’t figured it out yet the selling is going to end. At some point there is going to be a bottom in the market.

18:20
It may be only a temporary bottom. We may see a bounce. Let’s say the market was to form a bottom today and it was to go from 2500. It may go up to 2900, right? 400 point rally, very easily, very possible, right? And then you’d have a lot of shorts that are like freaking out and covering and and getting squeezed along the way and then people would say okay, the bottom’s in, the bottom’s in and then a new sell off.

18:43
We saw that back in 2018 when we had to sell. We actually had a quarter 4 of 2018 when we had that three month sell off. November was positive. Remember it was positive because we had a dead cat rally that led to the December saw. So maybe we ended up still getting another leg down. But at some point there needs to be a bit of a relief rally here because you can only push stocks in the dump.

19:02
I mean it’s getting kind of crazy at this point. You know, I mean the stocks, the stocks are really, really depressed. So you got to have a little bit of a reflex there. And so at some point you’ll get that. But you can’t be married to your trades. You got to say okay, I made a good run. The market’s starting to cave a little bit here.

19:20
It’s starting to get shaky. I’m going to start booking profits. Book profits along the way and you’ll be fine. You will manage the risk, manage the risk. Trade according to your comfort. You don’t have to be the hero in this market. Live to trade another day, guys live to trade another day.

19:38
This is hard times. Whether you’re short the market, whether you’re long the market dude, you’re seeing. You’re seeing thousand point swings on the Dow on a daily basis, sometimes multiple intraday swings of like 1000 points. We’ve already had one today, S&P, where I had 160 points and 10 minutes off the lows of the day came back down with 100 point move to the downside.

19:59
And that was before the fact that it had already made a 240 point move before the FOMC came out. So it’s crazy. It’s crazy what? Whether you’re long or short, it’s stressful, man. I’m telling you this last three weeks of trading has been some of the most tiresome times.

20:18
It’s been a struggle for me to get content out, to want to do these podcasts because I’m wiped out and tired. This market is wearing everybody out. It’s tiresome. It’s stressful. You’re making decisions. You get into a trade, within 5 seconds you’re down 2 or 3% on it.

20:33
You can have a trade that you’re up five or 6% in one day and then all of a sudden the next day you’re down 10%. OK? There’s just some wild, wild swings and it’s stressful. It tires you out, man. So people are panicking in the world of insanity. Beat the same one.

20:49
I’m going to leave it there guys. Take care. And God bless you all. 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.

21:05
With your membership you will get a seven day trial and access to my trading room including alerts via text, e-mail and WhatsApp. So go ahead, sign up by going to shareplanner.com/trading Block, that’s www.shareplanner.com/trading-block and follow me on SharePlanners, Twitter, Instagram and Facebook where I provide unique market and trading information every day.

21:27
If you have any questions, please feel free to e-mail me at ryan@shareplanner.com. All the best to you and I look forward to trading with you soon.