Rebel Traders 071 : Politics and Trading

Urgg… Politics! love ‘em or hate ‘em politicians have a HUGE influence on the markets with every random tweet, diatribe, and stupid statement or carefully crafted hyperbole.

One thing that is undeniable is the effect politics has on the markets. We're in a world where a single 280 character tweet can send financial and economic ripples across the globe.

Right now, every politician seems to be stumping for more votes as we approach the midterms, and it can affect your portfolio.

So, in this week’s Rebel Traders Podcast, we’re going to tear it up and break it down. It doesn't matter what side of the aisle you are on and whose picture is on your wall or dartboard.

Politics can and does have a direct influence on your markets. The results of these midterms could have a massive effect on what happens next on the US economy, and we examine those ramifications.

Come and join us as we rock this out...

Time Stamped Show Notes

Read Full Transcript

Sean Donahoe: Urg, politics! Love them or hate them, politicians have a huge influence on the market. With every random tweet, diatribe, and stupid statement, or carefully crafted hyperbole. All right, anchor it, let's do it.
Automated: Rebel traders takes you inside the world of two underground master traders who take an entertaining, and contrarian look at the markets to cut through the noise of Wall Street, and help you navigate the trading minefield. Together, Sean Donahoe and Phil Newton are on a mission to give you the unfair advantage of a Rebel Trader. And now, here are your hosts, Sean Donahoe, and Mr. Phil Newton.
Sean Donahoe: Hey, hey, hey this is Sean Donahoe, and welcome to the Rebel Traders podcast. And, we've got ... Oh, this one is going to be a sup.
Phil Newton: Gracious elfs.
Sean Donahoe: Where we placed a whole lead. Absolutely strap in, because it is going to get interesting. We are going to try, and avoid jumping on particular soapboxes, but as I was just saying before the show that is like trying to put Phil on the American Ninja course, running he goes up, he's double taking the monkey bars. And, I'm probably in danger of jumping off a few soapboxes myself here, but it will be a big-
Phil Newton: We'll be making big splashes when we hit the bowl of beans.
Sean Donahoe: Quite likely will be some nasty goopy stuff as we get slapped in the face with it. And, we're going to have a little bit of the realism in this as well.
Phil Newton: Tongue in cheek.
Sean Donahoe: I mean, yeah, tongue in cheek, but this is-
Phil Newton: I like the way we both said opposite things there. I said tongue in cheek, you went realism. Well, somewhere in the middle, you'll find something amusing.
Sean Donahoe: Absobloodylutely. Anyway, so yeah, this one is going to be a doozy. It doesn't matter what side of the aisle you're sitting on. It doesn't matter who your preferred president, or which senator, or congressional representative is hanging on your bedroom wall, or your dart board. These guys, they all have a huge influence on the markets with the midterms looming. We're going to dive into the swamp, and pick apart a few what if scenarios, and what's going on, or what could be influencing, what's going on, what has influenced the market, and much more. We may stir up a few controversies as well along the way.
Phil Newton: Maybe, yeah we're going to try, and find some hornet's next to bash on our maybe.
Sean Donahoe: Absolutely, yes.
Phil Newton: I'd like to precursor any of my comments with an apology, because I'm bound to piss someone off. And also, to double down on that. I've not really got a horse on this race as the saying goes, literally it's just my viewpoint. So, take it for what it's worth pitch of salts, or nuts. It's just from the outside looking in. My view points are commentary, and that's what makes it interesting.
Anyway, glazier, after our shenanigans about political, or noncommittal, we've got trade fade, or invade. Not politically this time from the charts point of view, we're going to try, and figure out a couple of interesting stocks that have caught our attention this week, and try, and figure out what we're going to do. The whole purpose is to try, and figure out, or to highlight that we can find filter, and sort stocks very quickly, very fast, very efficiently when you have a systematic approach, and that's what we're trying to highlight.
Sean Donahoe: Absolutely. Now, if we could only trade fade, or evade a few politicians if you can.
Phil Newton: Yes. But, there you go. Maybe erase them. No, no, no, wrong show, wrong show.
Sean Donahoe: Yeah, great. Then, we're going to have the CIA knocking on doors, and stuff like that. Thank you very much. Okay, Secret Service, bom, bom, bom, that was a joke. I mean, I'll give you Phil's address off. Okay. So anyway, moving swiftly along here.
Phil Newton: It's already degraded this, hasn't it?
Sean Donahoe: It really has. But, this is a tricky wee show to do. I mean, it's one we have to, especially with the midterms right around the corner just over a week away. So, what we're going to be looking at here is basically the influence of politicians on the markets. Now, specifically the US markets, because obviously that's where our primary focus is. But, we were just talking before the show, funnily enough, even about British politics, which I've been out of that loop for approximately 20 years. Except from obviously from remote from being sat in-
Phil Newton: Into the big headline stuff. Yeah.
Sean Donahoe: Yeah, exactly. Obviously, with Brexit, and everything else. And, that's what we were talking is the influence it had on the British.
Phil Newton: global market, yeah.
Sean Donahoe: Yeah. That's had a huge effect on the British market. It had a whipsaw effect at the time of the vote. And again, money was very nicely made, and traded, and changed hands right around that, but at the end of the day, again, there's a lot of influence there from the British side. But, we're all focusing on major events, and oddly enough even micro events including events that occur in 140 characters, or less on social media. The power of a tweet, random brain farts, stratagem that is going to be open to debate obviously. But, one thing that you can certainly say about our current commander in chief is he does tend to bypass everyone, and put his stream of consciousness right out on Twitter, which gets ... I mean, it's almost like he does public policy right there on social media. I mean-
Phil Newton: About how many likes and shares he gets.
Sean Donahoe: Yeah. Think about this for a minute. He talks directly to world leaders, and directly to countries, not through formal letters, not through ambassadors, he just says, "That's absolute bullshit, fake news." And again, love him or hate him, one thing he has done is changed the fricking narrative, and changed the system.
Phil Newton: He's changed a lot of things.
Sean Donahoe: And, the landscape. And, the thing is though, one of those tweets could have a massive effect on the markets just like that. I mean, suddenly boom, he's talking about-
Phil Newton: And, we've seen that it's not one of the , yeah. It's multiple times we've seen it. Multiple times.
Sean Donahoe: That adds not only volatility to the administration, but a lot of volatility to the markets as well.
Phil Newton: But, I think that's the power of mass media. And, you've got literally a direct channel to the people who can move, and influence the market. In this case, the ultimate political power. You've got direct contact with him, because he does reply to things. So, it's not just some faceless person behind the name. Again, come back to whether you ever love him or hate him. Personally, I think he's a narcissistic prick, but politically you've got to decide ... He got in power for a reason. People voted him in for a reason, and whether you approve or disapprove, enough people approved for him to be where he is, and to do what he's done. Again, whether you agree with policies, disagree with policies.
And, because he's got this, he's got a following. He literally is a figure heads, not just in the political sense, but also in the social media. He's got this audience's power, this following. And, with the power of 140 characters, as you said, or it's a little bit more now, isn't it? That can send reverberations around the world. Five years ago that would never have happened, 10 years ago ... Who would've thought that 20 years ago any of this would have been possible, and he can just send a message out to the world, and the world moves from the markets. We've seen the impact of this. This is major power from ... He can literally crash a stock for a day maybe, or it might recover, but he can literally move the markets with a random brain farts essentially.
Sean Donahoe: Yeah, absolutely. Yeah.
Phil Newton: I don't think whether that's scary, or nuts. It's ... Yeah. Is it a head shake, or is it a high five that you want to give this person?
Sean Donahoe: Well, I think for both sides it's a little bit of both. The thing is though, by bypassing conventional channels like previous presidents, I mean the previous president who really had the influence in social media, Barack Obama, a lot of the tweets that went out on the public things, they went through a department that was an official channel that was refined, filtered, and put out there.
Phil Newton: Yes, who would put it for him.
Sean Donahoe: This is in with his phone. But, Melania, his wife occasionally hides when he gets on a tirade, and is like, "No, no, you can't have your phone."
Phil Newton: And, he starts calling me the whole his face for example.
Sean Donahoe: Yeah, don't even get me started on that, that's hilarious. But, I mean I say hilarious, but also ridiculous at the same time.
Phil Newton: Yeah. Well, I thought it's one of those life crisis, but then that's when you start questioning, is this really smart, or is it really dumb? It's either one dramatic extreme while the other when you see nonsense like that to be fair. Because, things like that are nonsense, and he's got power at his fingertips that seemingly gets abused quite regularly. But, then other times you think, "Actually, maybe there is something to this. Maybe there's a strategy behind it." It's just you can get to see inside his head literally, because he tweets it out to the world.
Sean Donahoe: And, when you look inside-
Phil Newton: That's scary, really.
Sean Donahoe: And, when you look inside his head, there's a big echo chamber in there.
Phil Newton: Home as in the monkey on the paddler, and the merry go round, doo, doo, doo, doo, doo, doo, doo, doo, doo.
Sean Donahoe: Pretty much. It makes you wonder, but here's the thing, one thing you ... Again, I have to say love him or hate him, he's doing what he said he would do.
Phil Newton: Yeah.
Sean Donahoe: I mean, I sure-
Phil Newton: I think that's the thing. That's the separation you need to make, isn't it? Personally, I've got very mixed views. I think he's very narcissistic, very self obsessed in that regard, but politically he's got to have been astute at some point to have had the career he had to get where he is. There's got to be something political acumen there in the first place to be there. So, there's two very different personalities here.
Sean Donahoe: Well, the one person who I'd never thought I would hear this from, I was reading an article last night with Pierce Morgan, who was over here, had a big show, and then disappeared.
Phil Newton: And, personally hates.
Sean Donahoe: I can't stand him either, but he wrote an article in the Daily Mail which was talking about how one thing that the Democrats can't figure out is how to beat him is because he's winning, and he's playing them all, and he's making things happen. He's doing what he was voted in to do. His list of things that he has done that were a lot of campaign promises are being done. So, and this is what is shocking a lot of people. And, I mean if you consider how much negative press he gets, which honestly a lot of it he brings onto himself. Let's just-
Phil Newton: Let's just say what it is. Yeah.
Sean Donahoe: Yeah. I mean he's his own worst enemy in a lot of ways. But also, you've got a lot of people who ... Which is ironic love him for-
Phil Newton: They love him for it. Through the same thing, they love him for it, for being box open. And, yeah. I mean, I suppose from a marketing point of view we would call that pointing out the flaws. And, maybe you don't want this, it's got a little bit of a dig on it, and because you've had that transparent, and honesty, you love them for it all the more. Because, he acts the goats, and he acts the fool, those who love him, love him more for it. But then, that's the counterbalance those who hate him, hate him more for it, for the same reason. His personality isn't-
Sean Donahoe: Iron raising.
Phil Newton: Yeah. And, I suppose from that perspective it's quite smart what he's doing, because you could just be somewhere in the middle, and be like, "Man ..." Because, we've heard Hilary started by comparison was the person who was in the middle not really doing anything different who's followage, I'm in the same drum, everyone else is banging, doing the same things that everyone else was doing. There was, yeah, you couldn't really find a reason to rally behind her by comparisifies. Again, whether you love her or hate her, but just from the outside looking in, that was my perspective. She wasn't really doing anything that anyone else wasn't already doing, and that was the attitude.
Sean Donahoe: Yeah. And, the ironic thing is when you look before the election, I don't know if you recall this over there, but one of the things that Hillary was talking about a lot was, "Oh, you have to accept the results, you have to accept the results," because she was bold that she would win against this buffoon that again, the media was talking about this clown that was from-
Phil Newton: Complaisance.
Sean Donahoe: And, everything else. But then, once the election rolled around, it's like no one accepted the results. It was cracking me up. But, at the end of the day, the thing is the negative media coverage, I mean, I saw a statistic, it's 90 something percent, 92% negative coverage of Trump.
Phil Newton: Wow.
Sean Donahoe: But, it just seems to make him stronger, and it's like feeding the beast. I was talking to Phil right before the show. Let's say it's like that scene of ghostbusters, choose the form of the destroyer. It's like, okay, I've thought about the monster is Mr. Stay Puff the marshmallow man. Okay.
Phil Newton: You think of ...
Sean Donahoe: The thing is here he has been such a disruptive influence, and the thing is he's gone to Washington, and figured out the system, and how to play one of the other to get shit done. And, again love him, hate him, whatever the effect he's had ... What I want to do is let's tie this actually back to the market. Let's pull up, and I know you could do this too, and you can do this at home. Pull up the main market, and let's-
Phil Newton: Follow along at home people.
Sean Donahoe: But, if you look back at the markets on the Weeklys, because we want to look back for several months. Let's go back, and look at the point of the election. Now, if you remember election night, it was an insane, insane night. I mean, the markets dipped.
Phil Newton: Do we have a date for that for those people who might not be all US based? Because, we do have an international audience.
Sean Donahoe: I think November six if you want to go back on the Daily's to look at that back. But, if you look at November ninth, I apologize if you look at November ninth on the Daily, if you look at that particular day, look at the volatility in the markets the day or the night he was won on the features. And, you'll see it went from-
Phil Newton: I think if we could add a sound effect to this, I think the sound effect would be 'budoing.'
Sean Donahoe: Well, exactly.
Phil Newton: Because, it's from the run way. Because, everyone thought it was a bad thing initially at first, and then the markets reacted positively as they normally do when ... If you think about it, there's the uncertainty before, there's the oh, shit moments, because everyone was swinging towards Hillary. And then, when it turned out that it wasn't, and it was Trump that was the kind of that, "Surprise!" And, everyone jumped up from behind the curtains.
Sean Donahoe: Yeah, pretty much.
Phil Newton: So, that caused this, 'budoing' that I was just talking about. But then, what happens regardless of who was voted, this would've happened, because now you've got political stability.
Sean Donahoe: Yeah. I mean, but we're talking about a high low range.
Phil Newton: Just to quote you Sean, you've got a known known.
Sean Donahoe: Well, exactly, but we had-
Phil Newton: As opposed to an unknown known.
Sean Donahoe: But, we had 140 high low rate. 140 points on the S&P 500 high low rate. That's insane in one day. But then, if you go back to the Weeklys, look from that point in the election to where we are today.
Phil Newton: Give us a date Sean. Help us out here.
Sean Donahoe: 2009. Okay. Let's look at back ...
Phil Newton: There we go.
Sean Donahoe: Because, I want to talk about two different administrations. And, we want to do-
Phil Newton: There we go. So, that helps. For the people following along at home, we need the date Sean, so we can follow along.
Sean Donahoe: Well, look at the 2009 crash up to 2016, November 2016.
Phil Newton: Great. So, we've got that the Obama administration.
Sean Donahoe: Yeah. So, that's-
Phil Newton: So, the Obama years.
Sean Donahoe: Yeah. The Obama years so to speak.
Phil Newton: It's not quite, but essentially that. That's the big ball gaze there, isn't it?
Sean Donahoe: Yeah, 2008 to 2016 was Barack Obama's administration. And, you can see that we were recovering from the big housing crash, and everything else, and it was an economy that was picking back up. And again, if you look at it you can see first from 2009 to 2012 hesitant return, hesitant return coming back up, and then picked up from 2013 to 2015, 2015 to the end of 2000 ... Well, beginning of 2015 to end of 2016, two years. That was range bound couple of ... It looked like it was going to be the bearish market that we ...
Phil Newton: Well, I thought that. Let's fair, we've commented this a few times in the past where that's off 2015 to the early 2016, maybe that was a bear market, because of the ... Because, let's face it, the financial markets they were manipulated, and they have been manipulated since 2009 since the financial ... Because, it needed to be to create a complete collapse the financial system, things have to be done, put in place, tweaked, adjusted, propped up, shot up however you want to describe it, but collectively it got called quantitative easing. It was manipulated, let's just say what it is, so maybe that was the bear market we should have had.
If I'm going to be in my bear market, is a healthy multiple ... Yeah, multiple cycle, however you want to phrase it, which you'd normally see financial prices sell off usually anywhere from 30 to 50% off. I mean, we already had that a very fast clip with the crash, because for exactly the opposite reason. The markets were manipulated then shot up and pressed up, and everyone was taking a piece of the pie out of the markets.
It was manipulated in bad ways, so now that they've tried to manipulate it in a good way, maybe that section of 2015, 16 area maybe that was the bear market that we should have had. But, because of that manipulation, it just never transpired in a price decline, if that makes sense.
Sean Donahoe: Yeah, absolutely. Now, if you look from November, 2016 onwards, up to say beginning of 2018, 2018 has been interesting and volatile time, because of the trade war with China, but one thing he was saying all through the election was we need to address the balance of China's unfair advantage. And, we're having a manufacturing boom, we're having an employment boom, we're at 60 year lows, I think it is. They said 69 it's the highest unemployment rates in 69, or something like that.
One thing you can't deny is what looked like it was going to be a rollover, because if you look at say like January 2016, that was a lower high at the end of 2015, and a lower low. I mean, to a lot of people that was going to be outward tipping into bad territory. Now, we're on the rollover.
Phil Newton: We were talking about, and so we were like, "Is this it? Is this it? Is this it?" "Oh, no."
Sean Donahoe: Yeah. It turned out that we got recoverated.
Phil Newton: We do. We got really excited.
Sean Donahoe: Absobloodylutely we were. But, if you look at it even into the beginning of 2000-
Phil Newton: Cross cancel.
Sean Donahoe: Yeah. But, in the beginning of 2016, which again, election year we had very much a range bound. Even like April 2016. We had another pause and hesitation, and it looked like, well maybe, okay, we've recovered out of that, but we're looking, are we going to roll over? Is this the pause before a big dip. But then, as the excitement, anticipation grew into the end of the year when the election actually finalized, people were holding their breath, businesses. A lot of the CEO I know put all of their plans for 2017 on hold. They had two contingency plans. A lot of them I knew had two different business plans, or game plans for 2017 based on which idiot got into office.
Phil Newton: I'm just going to say, I'd just like to clarify that. When it comes down to policy, the policy that they were going to bring along what they were promising to the nation at large. Because, to be fair for what we're doing Sean, and for what I do most of the time, this doesn't matter for me, this conversation, whatever, it's inconsequential to my decision making process. However, if we were investors, two year, three year, five year, 10 year, 20 year round, the policies these politicians bring with them, they're going to take multiple years to maybe unfold, or realize the impact of there are going to be significant changes.
So, maybe a percentage point here, or a shaving there as it's often referred to. It doesn't seem like much, but that has a massive ripple effect as you sometimes talk about in the lonjure economy, that might take several months, maybe even several years to actually play out. It's just the ramifications of that policy change. And, that's what you're talking about here, isn't it? It's not changed, so the plan of action that ...
Again, I was thinking about, it's like the markets collectively people, the business owners that all have companies that are ... Or, responsible for companies that are listed on the market, they're collectively holding their breath, they're putting plans on pause, and then it's okay, and breathe. Now, that we've got that political certainty when whoever is voted in is voted in, then that's what we've got the contingency plan for candidate a or candidate b just to keep it nameless, and neutral. But, you've got those plans in place, because they're going to bring these policies into effect. And, if they do, then you're prepared to nurture, or grow your business, or divert funds from one area to another, because of the impact. Particularly with ...
International trade has been a major focus for most of this year. So, businesses you do international trade, particularly with China, they're scrambling, thinking about policies, thinking about changes, what are we going to do, import export? Think about the taxes, maybe they've got to find alternative suppliers, or alternative clientele, so that their exposure is minimized. And, that would have been put into play previously, just after the elections when the confirmation of who gets voted in, and the plans that person has got in play to ...
What I'm saying is Sean they've got this plan to deal with the things that person, the president who's voted in has promised the country, and that's going to impact an individual company either positively or negatively, and they've got that in play. And, what we're looking at from the charts point of view, is like a visual representation of that unfolding, and how that impacts the market. Because, if these policy changes impacted the market, the nation, the country negatively, then we would have probably gone into recession, and we would have seen the financial market selloff.
Typically, the way that these cycles normally unfold, because history repeats ... Surprisingly Sean, as we well know, history repeats itself very, very regularly, and every four years we've got this economic cycle. Surprisingly, it's in line with the political cycle, and that's not by accident. Because, normally when someone new is voted into office, there's a little bit of spend, spend, spend, policies are changed hopefully for the best. Everything that they promised that all the headline is trying to be delivered on as quickly as possible, so that they can say, "Well, we're keeping our campaign promise." And, that's normally what happens in the first two years.
So, it's spend, spend, spend, deliver on the promises, and the markets, the economy typically thrives, because we've got political certainty. That's what we see translated on the charts usually in an election year. When you've got that political stability spend, spend, spend, yeah, there's going to be some disruption when policy changes maybe, but usually it's for the positive. It's usually for the benefits of the nation.
Sean Donahoe: Yeah, and one other points I wanted to make was in 2016, a lot of the businesses I was working with the people I know, they were holding money back. They didn't want to put it into the business, to expenditure, to new plans, or anything else until they have that political certainty. One thing was, was a lot of them were saying, "Okay, if for example ..." And again, like I said there's a thing with Saul Alinsky, they call the people who do all the protests, and activists useful idiots.
Well, unfortunately a lot of the politicians are useful idiots as well, but at the end of the day, whichever useful idiot came in power, one of them being Hillary, they won't ... A couple of them that I know very, very well, we'll say, "We're going to take a lot of our manufacturing processes overseas, because this is going to become an unfavorable business climate." And, the general consensus was if Donald Trump became president, then this is going to be a much more favorable business climate. And, this is why a lot of businesses got behind Trump, and started making investments in this country, repatriating money into this country, because there was what was seen as a hostile business environment under other previous administration was now seen to be a pro business environment with a pro business person in power.
Plus, he's going to understand the business needs, and thus businesses can thrive. Which if you look at the acceleration coming out of that election cycle up to beginning of 2018, I mean it was almost on a parabolic move at the end there. Now, we've had again, a lot of retests, and retracements, because of trade tensions, but even looking ...
Phil Newton: It wasn't a steep incline.
Sean Donahoe: It was.
Phil Newton: It wasn't a steep incline.
Sean Donahoe: And, it certainly out of what was possibly going to turn over to be a bear market. I mean, it has broken to ... And, again to a lot of analysts minds as well as my own mind, it's broken the rules. We've been on almost a 10 year bull run. I mean, what I would call ...
Phil Newton: It's an anomaly.
Sean Donahoe: It is anomaly. It's an outlier event. And, even though we've had a couple of ...
Phil Newton: In the short term, we would refer to this as a price extreme. It is an anomaly, it doesn't often happen. And, this is why we keep banging the bear drum. It's not a case of if, it's a case of when. And, the longer this cycle of economic expansion, and financial growth keeps occurring, then the hub ... We could see a similar thing to 2008 just as a normal natural economic cycle of a bear market, and that would be a horrible thing to happen. So, a healthy bear market, it's a slow decline over four, six, eight months brief economic contraction.
Yes. It's painful to live through, people do lose jobs, and all the rest of it. But, that's healthy for an economy. That's like you get a little bit of a cold at the winter, you have a little bit of a flu jab, and then you're fine, and you carry ongoing. But, you get the point. It's like you need the little bit of contraction, a little bit of economic illness by example, or bad way of describing it, but it allows you to get stronger, because you build up that tolerance, that resistance.
So, we need that in the natural cycle, whether it's financial, economic, or just mother nature, that contraction is necessary for the next growth spurt. And, we've just seen growth, growth, growth spurts 10 years back to back, and it's not healthy, really isn't. And then, that's what has me worried. But then, at the same time putting the capitalist hat on, that's also the opportunity, that's what we're waiting for. There's going to be a lot of people getting a lot of money when this rolls over.
And, it doesn't happen quickly as we keep saying, it's like trying to turn an ocean liner around in a canal. You've got this multipoint turn. It's a slow progress when it happens. And, when it does, from a trading points of view, it's going to be absolutely wonderful, but from an economic point of view, it's going to be a horrible ... It could potentially be a bloodbath if it's not controlled. If we don't see a controlled fall essentially.
Sean Donahoe: Yeah. Now, one thing is we're coming as I say right into the ... And, usually politically for the administration there's usually loss of seats, loss of seats in the Senate, in the Congress, they're going to lose the house, they're going to lose ... That is usually the thing. And then, what happens is that becomes almost like a check and a balance. And, in this case, if there's a blue wave, the Democrats regain control of the house and the Senate, and that's what they're calling it over here. It's like, okay, they gain control. Then, you can expect a lot of obstructionism to pretty much any policy that this current administration wants to put.
But then, if the Republicans hold the house and the Senate, then basically what Trump is putting forward is going to be accelerated, because there's no one going to be able to get in his way. They're not going to be able to obstruct. Now, again, pro or against Trump, one thing that you can guarantee is if the Republicans do maintain control of the house and the Senate, more things are going to happen, good or bad remains to be seen. And, you being very attune ...
Phil Newton: We'll find out after as always.
Sean Donahoe: The thing that is very interesting is coming into the midterms, Trump's approval rating is at 47% versus Barack Obama's who was 45% coming into the midterms. So, one thing that is-
Phil Newton: So, he's coming in stronger by comparison, that seems to be what I'm hearing.
Sean Donahoe: Yes, exactly. He's coming in strong which means a lot of people are supporting his policies coming into this midterm, so it's going to be interesting to see. But, one thing as well is we're on the Weeklys. If you look over to the extreme right to the current bar that's unfolding at the bottom of the Bollinger Bands. If we have a couple of positive days, that's a very nice looking handle longterm that maybe starting to form their high end of walking towards the bottom of the Bollinger Band. Not outside of the Bollingers, but we are looking at that 50 day moving average of the Weeklys, and all the 50 moving average should I say on the Weeklys, it's not 50 day, 50 week moving average.
We are hovering in and around that which has been a very telling point of ... And, I hate to say a point of interest rather than a point of support, but if you look around that, it's an interesting technical level.
Phil Newton: Yeah. Man, I've been on that life and rush with Nike.
Sean Donahoe: Yeah, you did. It's like herpes when it comes to charts, but yes, it is a point of interest there that is showing a little hovering.
Phil Newton: It's like one of those support groups, "Hi, my name's Phil, and I've been moving average for you since ..."
Sean Donahoe: But again, with everything going on coming into the midterms, right now there's every thing you can throw at the wall against Donald Trump is being thrown. I mean, let's face it, we've got everything from what's happening with ... Phil mentioned the whole his face, the whole Stormy Daniels controversy, Avanetti there, we've got anything to do with Kavanaugh which was the big huha, and then everything to do with now the migrant crisis with all of these.
Phil Newton: Normally, we wouldn't care. Personally, I wouldn't care one way or the other, but because of who the commander in chief is, and the influence that he has by sending a tweet to move the markets however briefly, because it does happen. If he were to decide to send a tweet out about a stock, which he's done many times, it can have a positive, or a negative impact. Personally, I just want to switch it off, I don't care about most of this. It has no impact on my decision making process, but it just for a lot of people it does put that question mark against should I do something today when there's all this political uncertainty? If you're an investor, this is the time where you just going to sit on the sideline.
Sean Donahoe: Yeah. This is where I'm talking more of rather than the way we trade, funnily enough, we're talking more broad economy, and from an investment, and longer terms.
Phil Newton: Exactly, yes.
Sean Donahoe: But, yeah, for ...
Phil Newton: This is where you sit on the sidelines, and watch, and maybe have a little chocolate to yourself about the events that are unfolding. As a trader, those things provide opportunity. That tweets that causes a two day sell off, then that provides an opportunity, or a two day rally that might provide a profit seeking opportunity. So, in a very short term that might provide the entry criteria that buy the dip in an uptrend. And, to be fair, that's what we saw with this recent sell off that we've been talking about. Not for me, I certainly as I'm looking at the Weeklys, because that's what we've talking about, that's buying the dip in an uptrend.
Everyday, twice on Sundays, that's what it's providing for me. But, as an investor with the political uncertainty, you might just hesitate it. You might just pause, and just figure out, "Okay, well what's it going to go on?" Because, you've got the time to evaluate the information that comes at you, so that you can say, "Okay, well do I really want to be taking this action based on the situation, this political decisions being made?" Because, in six months time that might not have a positive impact on the investment choice that you've made. It might have a negative impact with the imports exports, for example.
If you've got a lot of exposure to overseas markets, because of companies that either exports or imports, then maybe that's where you pare back, because of the political choices, and decisions that have been made now, because they're going to be influencing the decisions in six, eight, 12, or maybe even two years out. So, that's why it's important for investors. That's why we're talking about this right now, both from a trading viewpoints. Yeah, does it matter? What does it matter? It provides an opportunity as opposed to a limitation.
Sean Donahoe: That's exactly, yeah.
Phil Newton: Again, I suppose just picking up on the same thing again, depending on your time horizon, depends on how you would treat the information. And again, we've spotted this, and we've danced around it several times in the past, but it all comes down to time horizons. I think that's the one thing that the trade fade, evade section has really highlighted for me by doing this is dependent on your viewpoints, and your expectation relative to time. My time horizon's 45 days maximum, but if your time horizon is more investor related, and it's two years out, or five years out, then the same information, you're going to treat it very differently.
Sean Donahoe: Absolutely. And, that's what we're looking at here. I mean, we're coming right into the midterms right now from a trading perspective, we don't care. I mean daily, daily, daily, daily we don't care.
Phil Newton: I don't. We don't care.
Sean Donahoe: Now, some of my investments are all going to be influenced by this, and I do have some longer term stuff. I'm involved with companies for example, that have a few fingers in different pies, longer term. Obviously, that's going to be more of a concern for me on that scope of my daily trading gets longer.
Phil Newton: And, this is when you might consider hedging strategies while we're on that subject for those long term investments. If you've got a genuine, and real concern about an adverse impacts, then that's the time where you would hedge. You would protect the profits, or minimize the downside risk, because of that, and that's when you would think about hedging strategies. That then make sense to do it, because you only do them as a situational thing. You've got this political uncertainty, you're worried about whatever the worry is, and okay, well how can I minimize my downside risk if that fear comes true? That's a brilliant reason to think about hedging, because again I get asked every week, should I hedge my position? What's your reason for it? Well, I just thought it was the right thing to do. Have a reason, and you can do it everyday. But, if you don't have a reason then why are you doing it? It comes back to objectives, and time horizons.
Sean Donahoe: Absobloodylutely. So, with that being said, yes, politics, politicians do have an influence on the market quite significantly for a longer term for a short term. Hey, there might be a quick news flash opportunity, or a news trade, or something like that as we talk about a lot. But, even still even coming into this, there is a couple of interesting things happening on the charts Weeklys as we're even talking about it, and I'm looking at the Dow Jones tipping. It's even the Dow futures this morning. I mean, it's hovering back and forth between bullish, bearish, and everything else. It's been back and forth quite a lot at the lower end of the bollies here at the moment. So, yeah I'm a little bullish coming into this period right now for at least the very short term, and slightly in the longer term.
Phil Newton: I'm not stressed at all. I'm not stressed at all. This is buy the dip. We actually spoke about this last week on one of the videos in the Facebook group that we did where we took a quick look at the charts. And, if you look back to the sell off earlier in the year, it's not quite unfolding the same way as of yesterday, which would be Tuesday the 23rd. We're recording this on Wednesday the 24th, but as of right now it's unfolding a little bit different.
Sean Donahoe: There are similarity.
Phil Newton: But, that spot the difference exercise that we keep talking about. The bit on the left, in this case, the sell of early in the year, it's unfolding almost in the same way. History is repeating itself a little bit different this time, but that's just the nature of these things, it's nothing for me to be worried about. We spoke about this last week, many days in advance of the impending doom that the markets were talking about yesterday, "It's selling off again. The world's coming to an end. Oh, crush cancels." And, that's what it was at the end of the day.
We've spoken about it's short term, that's an opportunity for me to find the dip. I'd lost count of the number of opportunities set that met the conditions, it literally is a fistful of trade setups that presented themselves yesterday, because of that sell off. And, it's fairly big time as far as I'm concerned. It's like I'm so spoiled for choice as to what to trade at the moment. It's unbelievable from a trading point of view, but from an investor point of view, it's like, well, maybe I'll just wait for some certainty, because this upper day downer day situation is really frustrating from an investor point of view. I think wait for that certainty. I think that's the take away. It comes down to those time horizons that we keep talking about.
Sean Donahoe: Okay, so with that being said, ladies and gentleman, let's jump over to trade fade, or evade. So okay, we're going to do ... This group we're going to call it, well a bunch of merchant bankers, and that is a Briticism, which I will not explain. But, if you do understand Briticism, you'll probably translate that one quite amazing.
Phil Newton: Company rhyme, and slang governor.
Sean Donahoe: Look it up on Google, I ain't going to go into that. So, anyway.
Phil Newton: You merchant banker.
Sean Donahoe: It is an insult.
Phil Newton: It might be the context.
Sean Donahoe: Absolutely, it is the context. So, anyway, let's start with one that we cocked up last week. Again, due to a typo, we were talking about Bank of America, stock symbol BAC. Now, I ended up with Boeing on my chart, Phil ended up with British Airways, and one of us called it.
Phil Newton: I was actually looking at BA on the charts, but in the UK, although the ticker symbol isn't BA, it's known as BA, British Airways in the UK site. I've always had that thing. And, if you type BA, it comes up with British Airways in the UK. So, I think that the point is it doesn't matter. From my perspective, I've never worried about what the name of the ticker symbol is. It only matters what the chart is doing, and the analysis if you won't say it right. That's all that matters for me. It's going up by the . It's going down to the valiant dungeon. The name of the ticket-
Sean Donahoe: As a property.
Phil Newton: Really doesn't matter. Is there a training opportunity? It's just a number on a screen, it stopped being important to remember what the name of the company was a long time ago.
Sean Donahoe: Absolutely. So, with that being said, Bank of America.
Phil Newton: What's my excuse?
Sean Donahoe: There you go.
Phil Newton: I'm just looking through it.
Sean Donahoe: BAC.
Phil Newton: BAC.
Sean Donahoe: BAC.
Phil Newton: I'm looking at it, Bank of America.
Sean Donahoe: .
Phil Newton: We're on the daily charts.
Sean Donahoe: I'm already-
Phil Newton: Trade fade, or evade. Well, I think I would trade actually. I'm looking back over the last 12 months from the beginning of the year, it's in a downward sloping range, versus the lower end of the range. And, if I was going to do something, I would trade it. It's a bullishing range lows for me, so I would trade it.
Sean Donahoe: Yeah, I agree with you, it is the lower end of a range. Looking back at the 12 months, and again my gut is telling me is ...
Phil Newton: It's not that it's probably wrong, it's not the best looking chance, but you've got to listen to that little voice. I mean, this is what separates trades when we're using very similar methodologies. But, if you don't like the look of it-
Sean Donahoe: Yeah, that's cool.
Phil Newton: Don't worry about it. I've given up trying to have an opinion. It's like I've got a process, and I know you like to add layer on discretion, and experience, and that's great. That's what makes us different traders. But, for me it's like I don't want that, should I, should I not. It's met the conditions, put the trade on, I do not need to think about it.
Sean Donahoe: Yeah, me personally, I think you're absolutely right. I think you got a low end of the range.
Phil Newton: Of course I am. I'm always absolutely right. Like Mary Poppins, I'm practicing the perfect, so ...
Sean Donahoe: I've never told you this one, I think there's better opportunities out there. I will be a little more selective about that one.
Phil Newton: I agree with that. It's not the best looking chart. Yeah. Again, this is the gun's to the head, if I had to do it, I'd probably be bullish for the reasons that I mentioned.
Sean Donahoe: Okay. JPMorgan Chase, JPM. Now, again, yeah.
Phil Newton: Evade.
Sean Donahoe: Evade as well.
Phil Newton: I think the speed is ... Yeah, I mean it's in a range. There's no real upper boundary that's defined. It's got a little bit of a lower definition on the boundary, it's a little bit wishy washy.
Sean Donahoe: It's a lower end of range as well. I'd evade this one. This one's very similar to Bank of America in my mind, it's like ... Lowering of the range, but it's not there.
Phil Newton: Yeah. I mean, it's not well defined. Yeah. I think between the two, if I have to trade it'd be bank of America, because it's got more definition on that range, whereas this one, it's obviously in a range, but there's not as well defined.
Sean Donahoe: Okay. Next one, Wells Fargo, which is another bank.
Phil Newton: No, I was looking at ... Just to highlight the thing that we were just talking about. I was looking at Wells Fargo I think that's common, so. I wasn't paying any ... I just typed in the next that one that looks that way which was Wells Fargo. So, that was Wells Fargo. Same thing. So, let me just go back to JPM, J-P-M. Yes. It's in a range. It looks very similar to Bank of America, whereas Wells Fargo is not as well defined by comparison. So, the same comments that are made for Wells Fargo.
I get it. It just doesn't matter the name on the screen forming. What's interesting is they're all in the same status. I'm going to guess before I looked at it, they're all going to be range bound whether how well defined are they. If I could only choose one of them to trade I'm going to look for the most well defined shape with very clear multiple touch boundary levels on the lowest mode touch boundary on the eyes, because we were looking at more of a range bound situations at the moment on these particular stocks.
And, at Wells Fargo, just for clarification, that would be the chart that I would say is wishy washy. It's not well defined, so there's no clear OPA. Well, you've got OPA in lower boundaries, they're not well defined. They're more of a zone as opposed to one specific price level, that's what I mean by wishy washy.
Sean Donahoe: Yeah. Okay. Next one. Citigroup, C.
Phil Newton: Definitely looking at the right ticker symbol now, double checking, Citigroup. I think the same thing here. I think this again, it's in a range. I would have to evade it, although technically it's at the lower end of a range. It's not well defined. I'll probably leave it alone.
Sean Donahoe: Yeah. I can see a couple of descending channel, rising channel. This one has very-
Phil Newton: Again, it depends on the time horizon you look at, you could be like a spider on acid drawing lines all over this.
Sean Donahoe: Yeah, exactly. Okay. Next one, Morgan Stanley. The-
Phil Newton: MS.
Sean Donahoe: No, no.
Phil Newton: No concerns with them. Another bridge. There's so many tickets, this is why I stopped bothering. It's another UK stock. So, Morgan Stanley, and I think it's evade. This is what I described as half an half. First half has gone up, second half is going down. I like to see one clear viewpoints, so I'd probably evade it for that reason.
Sean Donahoe: Yup, I'd absolutely be the same, evade that one. Goldman Sachs, GS.
Phil Newton: Same deal. Yeah, first half has gone up, second half is going down. Compared to where it was 18 months ago, there's no real change. It's again wishy washy also half and half. It's not really clearly defined what's going on. And so, I'd evade it.
Sean Donahoe: Okay. Charles Schwab, S-C-H-W.
Phil Newton: Well, this has been a little bit of everything as well. Having said that, I'd probably class this as doing something new. Since the beginning of the year, it's in a range, and it's just broken down in the last two, or three weeks from pushing below $50 down to $44 approximately. So, this is what I would class as something new, it's broken out of the range. It's been pretty well established for most of this year. I'll be waiting to sell a rally, your classic breakout, pull back. This for me would be a maybe. if I was going to do something, I'd wait for the rally, and then I would ... What we're calling faded. So, I'd be bearish on this if I was going to do something. I'd be waiting for the rally, and I'd be keeping an eye.
Sean Donahoe: I would be waiting for the rally. I would be bearish on this one as well for the same reasons, but I would wait for the right entry point. Now, this is one you've probably never heard of, or you might have Synchrony Financial, SYF It's actually the GE capital, it's the GE financial spinel.
Phil Newton: So, just again, first time I'm looking at it. So, I think just the fact that I'm just hesitating in what to do, is saying everything I need to say, it would be evade, because I'm having to think about what's going on with the charts. It's not well defined. We could argue for most of the sheets in a range it would be downward sloping downward channel if you want to put a label on it. Not really well defined, they'll put a lot of boundaries. I can't see the obvious. Which way is it going to think about should have you bullish bearish, or be doing something with the range. It would be evaded for that reason.
Sean Donahoe: Yeah. So, what he's saying, exactly saying, descending channel if there's not really ... I could see a couple of potential without putting out my Trend Line tools. Yeah, a couple of points there. But, it's right in the middle of that range, so having to hold that descending channel, I would evade it.
Phil Newton: I think this just highlights the point that we keep talking about. You can find the trade if you look, but if you've got to look hard at ... Well, because the first thing that putting there is it going up, is it going down, is it going sideways? What's the trend? The trend is your friend, because that's going to help you determine what to do next. If it's going up, you need a countertrend trade, or buy the dip, they're your two choices.
So, you want to know is it rallying in a downtrend, or is it dipping ... Sorry, is it rallying in an uptrend, or is it dipping in an uptrend, so you countertrend, or with the trends. So, that's why we're looking at that trend. And, if you can't figure out what's going on in the time line, I would say a minimum of 12 months I'm looking at around 15 months on my chart is a default viewpoints. If I can't figure that out, I'm not ... If it's not going up in those 15 months, and it's very clearly going up, or it's going down, or it's in a range I'm not that interested. And, that just means that I don't have to spend 10 minutes, 20 minutes-
Sean Donahoe: You're seeing the trend.
Phil Newton: An hour under the act of an ... Yes. Air Fingers in the air, we're waving their arms, analyzing the charts, I don't want to have to figure that out, because hey there's no trend there.
Sean Donahoe: It becomes mental masturbation.
Phil Newton: Yeah, it's just why are you spending an hour looking at the charts? I mean, we can always ... And, this is the point, you can always find a trade, but is it the right trade today? And, that's what I'm looking for. Yeah, there maybe a trade on that, and we've heard us say this a few times. It's like, well yeah, I'd probably trade this, but I would wait for the extra condition. When you've got a systematic approach to find, filter, and sort stocks, again, you'll hear me say this, and there is-
Sean Donahoe: There is a reason.
Phil Newton: A reason for it. You've got this. It just gives you so much clarity. You're not wasting time, should I trade this stock? No. Well, stop looking at it, and go read something else. You don't need to waste an hour drawing Trend Lines, and Fibonacci, and Dow-theory, and Dow-three. We'll, put them in Jones. Some dick head was talking about a 100 period, and a golden cross on the news yesterday, maybe I'll do that, and I'll follow up to, and suddenly your three hours have disappeared. And, your still trying scratching your head, "Should I trade this charts?" No! You made that decision an hour ago dick head, move on. It's just such a waste of time. It really is.
What's the trend? We have this drill, it's one of the few things that I agree when it comes to the textbooks, isn't it Sean? It's like the textbooks say the trend is your friend, well what does that mean? To me it means looking at the time horizon in the last a minimum 12 months, usually around 15 months for me. Is it going up, yes or no? And, if you can't figure it out with a definitive yes or no, it's a maybe. Well, half and half is how I describe that maybe. It might be doing this, it might be doing ...
If it's anything other than a yes, it's going up or down, or range bound, I'm not interested, I and go look at something else. And, that just frees up the day for me. And, it means that I can just zoom in on what I'm going to trade today, and not worry about what I might trade by analyzing the chart, and finding the trade, and seeing if some minimum stock's line up. None of that matters without the trend.
I can't stress the importance of it, and it's such a simple addition. Everyone can add so they're treading routine, whatever your strategy is, if you just add that in, trend. What's the trend? It's going up great. If you're a Fibonacci trader, and you're buying retracements, the trend's really important.
Sean Donahoe: Who would've come?
Phil Newton: Who would have thought it? Who would have thought it? There's a method in the madness, and it's such a simple thing. You can probably gather Sean, I don't know if you heard in the tone of my voice, I'm a little bit passionate about people adding that step into their process. Whatever their step is, just add that into your regular routine, and it will make your trading so much better, easier, and quicker, because you're not wasting time unnecessarily adding Trend lines, Fibonacci, Dow-Theory, Dow-three, Elliott wave.
Whatever it is your thing is you can filter, should I spend that time on this charts by figuring out am I in an uptrend? Great, okay, well maybe I'll use a Trend line, because it's very clear we're in an uptrend. And, there's a very defined boundary level, and maybe I'll use Trend Line stuff, great. Easy peasy lemon squeezy job done. And, if you can't figure it out, wonderful. I'm going to just kick that soapbox to one side Sean.
Sean Donahoe: .
Phil Newton: My fellow countrymen.
Sean Donahoe: Time is moving my countrymen, lend me your charts. Okay, so.
Phil Newton: Lend me your charts.
Sean Donahoe: Anyway, there you go ladies and gentlemen, that is the end of this weeks show. And, I do hope you enjoyed it. Thank you for listening. We do appreciate it, but remember the show is not free. It will cost you a five star review. Just go to And, from there you can subscribe, and review us on your favorite way to listen to the show.
Phil Newton: You can also connect with us on the Facebook's, and the Twitter machines. Again, if you go to the same link, you'll have all the relevant links We're quite active in the Facebook group, we typically do a daily video that you can have a little peek over my shoulder, and see what we're looking at, how we find it. And, we play the visual version of the things that we're talking about on this show, just so you can connect the dots as it were, and see what we're doing, how we're doing it, and why we're doing it. And, maybe there's a few common interludes on there as well, and that's in the Facebook group, if you'd like to join us. With that said Sean, what have we got coming up on next week's show?
Sean Donahoe: Well, next week we're going to be doing a thing called, 'Always be prepared to change your mind.'
Phil Newton: Oh, that's my favorite.
Sean Donahoe: I was going to say, one of Phil's favorite words, but we're going to talk about that, and when really you should decide to change pivot, and move the hell on. So, with that being said, we'll rock on from there, take care, we'll see you next time.
Automated: For more cutting edge trading advice, and a free trader workshop to help you build a personalized trading plan, and make smarter trading decisions, do in to now.
Automated: Future options on futures. Stock and stock options trading involves a substantial degree of risk. It may not be suitable for all investors. Past performance is not necessarily indicative of future results. Trade Canyon Incorporated provides only training, and educational information. If you actually understood, and listened to this, then that means you are awesome. Congratulations, and well done. Notice this product may contain nuts.

(Click the time stamp to jump directly to that point in the episode.)

3 Key Takeaways From This Show

  • Time horizons matter. Long-Term it will affect you. Short term traders, not so much...
  • If the Republicans lose the House and Senate you can guarantee this administrations progress will be stymied...
  • Plan 5-steps

Connect With The Rebel Traders

Download our Private "Universe of Stocks"

Download the 350 "Core" stocks we look at every day that present the best opportunities. Just enter your name and email below to download now...
We value your privacy and will never spam you

Comments are closed.