When The Stock Market’s Momentum Fades | Podcast Episode #65

0:07
Learn to trade, stocks successfully, learn to profit consistently. I’m Ryan Mallory. And on my weekly podcast, I’m going to teach you the in and out of a complex ever-changing stock market. You will learn to trade better trait smarter and profit bigger.

0:26
Now, let’s go trade. Hey, Hi, this is Ryan. Mallory doing another episode of Swing trading the stock market, glad you’re here today to listen to what I have to say. And honestly, I appreciate you listening to all the episodes that you guys have. And if you’re new to this podcast, you know, I hope you keep on listening and listening to some of my previous ones and I try to make these episodes very relevant to what we’re seeing today but also Evergreen going forward to.

0:55
And that what I mean by that is that I try to make these episodes based off of something that we’re seeing. The stock market today, but also relevant to, where if you listen to this podcast, 5 10, 15 years down the road, it would still be relevant and in your trading and something that you can learn from today, I want to talk about when momentum fades in the stock market, and we’ve been seeing a lot of that here in recent days.

1:20
So, mainly we’re seeing a lot of it with the small caps, we’re seeing a lot of it with these morning pops that result in afternoon Fades. So were you off? Oftentimes see the momentum fade. Most often is at the all-time highs. It’s usually not in the middle of a good solid rally.

1:38
Yeah, you’ll have times of consolidation where the market doesn’t really move higher and maybe it’s a bull flag or something like that or a triangle continuation. Triangle. But what I’m talking about is when it just seemed like, there’s no one willing to buy the market to new all-time highs or to keep pushing it to New all-time highs.

1:55
And right now, we’re seeing that in the stock market. But we’ve also seen it going back in May going back and April time period. And we also saw it back in August Late July. If you go back to October of last year, we saw that unfold and we saw unfold in a big way too.

2:13
So when the momentum Fades, it’s often happening at all-time highs. Does it happen? At least? No. Because when we’re making new lows we’re doing that on some really strong Panic selling right? And then when we finally do bottom we’re bouncing pretty hard.

2:29
So this doesn’t really apply to the lows that usually applies to all time highs or after a substantial rally really. So that’s what I’m talking about here and some of these Hallmarks of of momentum fading in or when the market just can’t really push much higher is when you’re seeing morning pops followed by afternoon Fades.

2:48
Now we’ve seen that a lot this week and last week and we saw it a lot back in an August as well. You also have well established trend lines already in place. And so these trend lines are often mature and when they get really mature, they tend to start losing their Mojo.

3:03
They start losing the peel to keep buying the dip. Now, what makes these kinds of markets difficult is that there’s not a lot of panic selling. There’s not a lot of reason to get short now at some point there probably will be, but for a good part of this moment in the stock market, you’re not seeing a lot of panic selling, but you can’t really get the market to push.

3:24
Substantially higher and that can be really frustrating for Traders. I know it is for me often times and so like in the month of September the markets up but there hasn’t been a lot of momentum. We’ve seen the momentum in the small caps but even now that’s starting to fade off some. So the large caps have seen a difficulty really attracting attracting buyers.

3:43
And so for me I’m not going to go bile. You know, stocks that have like market caps of five or six million dollars or even a couple hundred million dollars. My focus is usually on the large caps or stocks that have like a market cap over 5 billion or so. And the reason why I do that is because there’s usually a little bit more safety in those kinds of stocks in the sense that you’re not going to wake up as often to like a 20% gap down.

4:06
I haven’t had that happen in ages. So I’m pretty particular about the stocks that I choose because I don’t want to wake up to. I don’t want to MIT wake up regularly, to massive headline risk. That oftentimes, your smaller cap stocks, have to deal with regularly.

4:23
So, you got the mature Trends, you also have the afternoon. Fades, you have low volume, and I use this, the TC 2004 my charting, but they have an indicator called the volume Buzz, which I actually find really interesting. And you’re seeing a lot of very low volume price price action.

4:42
So, when the market moves up, it’s usually on like a – volume buzz. And so it’s not uncommon for it to get to like, – 50% which is really, really low compared to previous trading sessions. Then you also Every Loop picks and I get very nervous about the vix when it gets into the 11 and 12 range because of late throughout the past year that has been a launch pad for for some serious selling to come into the market.

5:04
And right now we’re at the 13 level and that makes me getting a little bit nervous, especially when I see the momentum drying up and I see the buying drying up. It makes me a little bit more nervous that we could see a big pop going forward. So how do you, how do you play a market?

5:20
Where the momentum is fading? And one of the best ways to do is play The market both long and short you know, take take a little bit of the risk out of the equation and and basically let let the marketplace because oftentimes it’ll go back and forth back and forth. And if you’re if you’re a student, if you can play both the long and short side and make profits that way.

5:37
So for me right now, I finally got to a point yesterday where I said, okay I’m going to add, SPX you which if you don’t know what that is that is a 3 2 1 and verse ETF of the S&P 500. I follow the S&P 500 every day. That that that helps me decide whether or not to Today’s a good day to add a long position short position or whatever and I use the SP so that my familiarity is best with the SP now.

6:01
Yeah, I follow the NASDAQ. I’m pretty familiar with that in the Russell and the Dal and everything. Really? I could care less about the doll, the doll is price. Wait, indexed. It means really nothing. That that’s what the news likes to talk about. That’s what the media gets all hyped up about when there’s a 500, or 600 Point drop.

6:17
But really the three indices you should be paying attention to the S&P 500 followed by the NASDAQ followed by the small cap. Yes, and it’s good to take the small caps and compare it to the large caps to see where’s the momentum Mac? Because like, for the most much of September, it’s been in the small kids, so you can play it long and short and use ETF place kind of hedge, or long positions.

6:37
That’s what I’m doing right now. I have SP X XU. I’m actually not losing anything really in it. I mean, I might be like a couple pennies down on it but overall it’s held up pretty good. My long positions are up today so I’m kind of playing it both ways here. And the other thing too is this. Don’t don’t over.

6:53
Position yourself. Don’t get too many positions going on once and I say that a lot and a lot of my podcast but so true position sizing and the number of positions that you take on how much Capital you allocate to the market is so much. So very important to how you succeed in the stock market. So so let’s wrap this up when you see the momentum fading in the market, typically happens at the all-time highs or in very mature Trends.

7:14
You see morning pops. And then afternoon Fades, you see, low volume load fix vote, which is the volatility index, is important to try and play the market long and short, when it starts to show signs of may be falling apart, keep some of those gains by being a little bit more neutral in the market.

7:30
Your ETF plays are a great way to do that. And you have to also, make sure that you’re not over positioning yourself. That means you’re being mindful of your position size and the number of positions that you’re playing at once do that. I think we’ll be okay. That’s going to do it for today. I appreciate you listening. Thank you, God bless thanks for listening to this week’s podcast That Swing trading with Ryan Mallory.

7:50
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8:17
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