Rebel Traders 079 : Fast Track Trading Success

With all the turmoil of 2018, it’s time to look forward into 2019 and how you can fast-track your trading the smarter way...

2018 is almost in the rearview mirror, and it’s going out kicking and screaming. The bears are coming out of hibernation and roaring up a storm, and the bulls are running for the hills.

Yield curves are flatter than an ironing board, and every old pundit is being wheeled out to give their 2c on what’s going to happen next.

Heck, they even wheeled out Alan Greenspan this week!

All the while, we're sitting back and watching the storms roll in. We're waiting with a cautious and wary eye while anticipating the moves, the twists, and turns.

With a balanced portfolio approach that we've been advocating for, we're locking in the profits accordingly.

Even so, we're a wee bit defensive in with our positions as the Fed raises rates another 0.25%.

So, join us as we listen to the winds of change and trim the sales accordingly as we look at the current state of the market and look forward to 2019.

Time Stamped Show Notes

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Sean Donahoe: With all the turmoil of 2018, it's time to look forward to 2019, and how you can fast track your trading success the smarter way. Ready to rock 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, this is Sean Donahoe, and welcome to the last show of the year. And, 2018 has certainly been an interesting-
Phil Newton: Year, Sean. The greatest show on earth.
Sean Donahoe: It absolutely is. I guess that makes me Hugh Jackman. I have no idea where you are in that pie, but hey, you can be .
Phil Newton: I must be at that same cloud.
Sean Donahoe: Yeah, there you go. That's about accurate, and about right. So, with this week show, here's the thing, 2018 is almost in the rear view mirror, and it's going to go out kicking and screaming all the way it seems. The bears are coming out of hibernation, and roaring up a storm. The Bulls are running for the hills. Yield curves are flatter than, well a pagans ...
Phil Newton: It's more of a yield straight line than a curve, isn't it?
Sean Donahoe: It really is. Yeah, it's flatter than an ironing board, and every old pundit is being wheeled out to give their two cents on what's happening next. All the while we're sitting back watching the storms roll in, watching with a cautious and wary eye while anticipating the moves, the twists, and turn, and profiting accordingly while being defensive. And, we're listening to the winds of change, and trimming the sales to keep with the multiple wind, and the likes.
Phil Newton: Yeah. Mixing your metaphors, and all the rest of it. You know what I find the ... You just mentioned, the pundits there, they always wheel the pundits in. And, it's funny that we keep talking about is that no one's actually got a clue. We don't pretend that we know anything better, or have anything inside information as it were, for lack of a better description. We just like, we're looking for history to repeat itself. And, that's all we're looking at doing, and yet when the pundits get wheeled out, like I said, they want their two cents worth. But, it's best guess territory is to what's going to happen next.
Anyway, so with that in mind, when you watch the pundits, just keep thinking about, they're just having a best guess, literally best guess. Anyway, later on we're going tell them best guess, and look at trade fade and evade, and see what we think, which way the markets are going when we look at some individual stocks.
Sean Donahoe: Absolutely. Now, he is talking about pundits there, again, the one that everyone likes to wheel out in these tamanchellous times is Alan Greenspan. It's like, okay, get him out of the closet with all the other skeletons. Lets-
Phil Newton: Blow the dust off, yeah.
Sean Donahoe: Blow the dust off, prop him up. Okay, let's get the sound bite, and shove him back in the closet. But-
Phil Newton: Cute Greenspan.
Sean Donahoe: Which a, I actually have a lot of respect for Alan Greenspan. He did the job back in the day, and he talks a lot of sense. He actually, funnily enough, a lot of us ...
Phil Newton: Didn't quite finish on a high notes. For the most of his career, he did all right. We give him a pat on the back, and a golden watch, and send him on his way.
Sean Donahoe: Yeah, pretty much. But, it was funny you were talking about this, and this is where we come to the table with a lot of what we do with charting and technical limits, so it's something that is our big bloody thing. But, let's take a look back, because we're in the same territory that we were before. If we look at the S&P 500 futures, but I always liked stuff, and we look back to the very beginning of 2018. Guess what happened? We had a nosedive. Yeah. I mean, not surprised, China, China, China, my China, my Russia, and everything else was continuing. But, the most thing was, hey, the trade-
Phil Newton: That we say China, the Chinese chicken.
Sean Donahoe: There you go. But, if you're looking at it, I mean, we were in that same low end of that range that was created around about beginning of .
Phil Newton: September, yeah.
Sean Donahoe: And, everything else. But, I mean, we're right there.
Phil Newton: If you look at the closing price, if you take the ... And, we actually put a video up in the Facebook group about this. Instead of looking at the open high, low close data, so when we look at the February low, it's the lowest low of the month, if that makes sense. But, if you just use a line chart and look at the closing price, because suddenly it becomes very scary, because we're right there.
Sean Donahoe: It is. It is. This is exactly what we've been talking about.
Phil Newton: We are right there on the low, the years low from the closing price perspective.
Sean Donahoe: Yeah.
Phil Newton: And, to be fair, a lot of big ding dong traders just look at closing price, they don't look at candlestick charts. I mean, if you look at the news, they'll typically always use a line charts, or they got a mountain chart where they can shade in, and fill below the line. But, they're essentially using a line charts to keep it simple. For the most part, that's what most people use. I mean, when I'm drawing trendlines, I use line charts. I flip back and forth between candles and lines quite regular, it's just a clearer picture. But, if you look at the line charts, a line on close for reference, you will see that it's pretty scary.
Sean Donahoe: We're way below. Yes. Yeah.
Phil Newton: It's pretty scary. We're either right there, or well below. Yeah.
Sean Donahoe: Yeah. And, that's why I'm saying the bears are coming out of hibernation. This is the point for us that was, oh crap!
Phil Newton: I've got my scrooge hat on, yeah. We've got the Christmas scrooge hat on. I've got my bear humbug phrase over the door.
Sean Donahoe: Yeah, that's exactly it. And, it's funny because it was this time last year, we were talking about Bitcoin coming through and crashing, and everything else that we had the scroogement duck prediction there, which is now infamous. But now, if we're looking at this right now, I can't help but say, this crashing .
Phil Newton: It's bear humbug, yeah.
Sean Donahoe: I mean, look, here's the thing, we've also got the Fed who today is having FONC meeting where they're expected to raise interest rates another quarter percent. And, the Fed has well telegraphed this. I mean, this is one thing that I think is a lot of people are missing.
Phil Newton: It's a known known as you like to say, isn't it?
Sean Donahoe: It's. It's a known known. That has said all throughout this year we're going to raise interest rates. We've been on a nine year bull run. We have hit the highs, I mean we hit the highest in September. I mean from January to April we had a little a pop, and then back down, but from April onwards up until September we have been pretty consistent, and we hit new highs. But, since then-
Phil Newton: Briefly.
Sean Donahoe: Briefly. But since then, nothing new has really emerged. Yield curve were already pretty flat. Okay? China, and the trade spat, and tangents there were already well know. The feds continued intention to hike rates was already known in September. Nothing really new has been put out there. It's just-
Phil Newton: So, I think that's a good thing, personally. We've spoken just to pick the bowl up there. I know you didn't drop it, but I just yanked it from your hands. I think that's a good thing simply because that I can steal your phrase, telegraphing what their intentions are. Because, if they put a surprise on the market, a surprise hike that would be bad for the markets. And, we started to see this trend of announcing what you're going to do well in advance before you're actually doing it, so it didn't create turmoil, and we saw that back sort of boom even.
It was 2003, 2004, here's what we're going to do. My first major observation of it was with oil price, because I don't know if you remember, but around the Gulf war, oil went $200 a barrel, $300, $1000 a barrel. Everyone was touting that the speculative price increases. The point was it was well announced, and I just put my little tinfoil helmets on for a moment. I think it was intentionally announced this way to prepare people for significantly higher prices than what was actually happening, because when the price hikes did increase, and it hit people at the petrol pumps, that's where we noticed it essentially. The regular guy on the streets as it were. So, when you fill your car, you're going to notice that you're paying three times more than what it was just a few weeks prior.
So, it was well announced, so that when it actually happens, it wasn't going to cause pandemonium, because what we would see previously, just even as recent back then as the late '90s in the UK, we were seeing people queuing to get the pumps, because of price hikes. There was panic, and people were literally filling their fuel tank every time rather than just do a top up, they were filling up every time. Does that make sense Sean?
Sean Donahoe: Yeah.
Phil Newton: So, there were queues, there were shortages, there was all sorts of weird stuff going on, because of that price hike, and the misinterpretation of that there was going to be a shortage, because the prices have jumped so much. And, there wasn't actually a shortage, but because of the fear it created a shortage, because everyone was demanding more than what they would usually consume. And all because of this lack of knowledge, this lack of information, this telegraphing of intentions, and that's when my awareness have raised. This is a really smart move, because it prevented what happened in the late '90s back in to that.
And eventually, $200 a barrel, maybe it's going to go to $300 a barrel, and no one batted an eyelid. And then, we saw it the post apocalypse in 2008 where it was we need to tell people what's going on so it doesn't rock the boat any further. And, we were already in a tsunami from a financial point of view of what's going on. So, it was smart to let people know what was going on. So, seeing it again right now in an already priced volatiles situation, honestly price volatility, we're seeing big swings in the markets is normal, and we've seen it for the last three, four months for an extended period. If you go back to the same period, even last year where you've got the big moves, you've not got that wide ranging days that we're seeing right now compared to even just this time last year.
Sean Donahoe: No, absolutely.
Phil Newton: The points I'm coming to is that it's a smart move, because when it happens it's not if, it's not a possibility, it's when it happens, it's probably going to be a little bit of a knee jerk reaction, nonstarter, oh, that's what they said was going to happen. They're actually doing it. No big surprise there. A little bit of a knee jerk reaction is people are just portfolios, and whatever was happening previously is going to continue after that, what is typically considered a major shift in fundamentals, because you find interest there.
Sean Donahoe: That's exactly it. Now, one thing that's getting me though, and this is where I'm not quite in the bear suit, it's out of the closet, hold out the mothballs just in case, but I'm not quit there.
Phil Newton: I'm not an optimistic bull anymore.
Sean Donahoe: No. I'm-
Phil Newton: Yeah. I mean, I'm a perma bear as you know Sean, but most of this year I've been an optimistic bull, and that's out the window. I mean, my panic buttons were pressed last week and earlier this week. It was, fetch the sandwich. Jeeves, fetch me my sandwich board. I'm about to go all naysayerish.
Sean Donahoe: Pretty much. But, here's the thing, like I said, a lot of what was driving the September highs, and the negatives that were in the market were already known. They were known knowns, like I said.
Phil Newton: Yeah.
Sean Donahoe: So, what's happened between then and now, yes we had a slight inversion of the yield curve, very moderate, but it's been borderline for a while. There's nothing really new going on. I mean, it's .
Phil Newton: Nothing's changed. Yeah. Same thing, nothings changed.
Sean Donahoe: This is more of a sentiment shift than a fundamental. And, the problem is that when sentiment, when the herd moves, not because of a fundamental shift, but because of a crowd move, then again that can be a pretty powerful driving force. And, a lot of the general public are also now a little more pessimistic, which again, and stymie money flow, which is one thing that's of a concern.
But, let's look at some numbers real quick. On January second of this year, and I'm using the S&P 500 futures as the metric. If you look at that, I mean, we closed at 2693. Okay? Now, yesterday's close, and I mean, we're just recording just as the markets are opening right now, but just take yesterday's close, we're at 2528. And, that's only 6% down from the start of the year. Now, that means this year is officially at this point where we're recording without having a down year by 6%.
Phil Newton: We've got a long way to go to half that percent of rally that everyone was expecting.
Sean Donahoe: Fuck me, yes. Okay.
Phil Newton: We got a long way to go.
Sean Donahoe: But, here's the thing, from the sentimental high-
Phil Newton: With two weeks left before the official bell rings on the year, there's a lot that's got to happen for me to think optimistically, santa rally well back in bull territory, it's got a big hill to climb.
Sean Donahoe: It does.
Phil Newton: And, it's not going to happen. It's not going to happen. I'm going to admit, to be fair just to while I've wrestled the microphone off you again, and hand in face style, what has me panic, why I was panicking was that sentiment that you were just describing a moment ago. We've broken the year in a very stereo typical low volume time of year.
Sean Donahoe: Yes.
Phil Newton: It usually doesn't take much to move the markets. Don't get me wrong, when I said move, it's still a million.
Sean Donahoe: And, if you look at the volumes right now they are. The volumes are absolutely flat.
Phil Newton: It's typically a quiet year is all simply a quiet time of year, and that's usually why people don't get involved. But, at the same time, that lack of volume can create opportunity, and it's always two extremes at this time of year. And, if you're prepared to spend a bit of time out the computer screens, you can find those whopping movements, because of that lack of volume. It doesn't take much to move a markets, or a stock, or an instrument, or whatever the opportunities that you're looking at, because of the lack of volume.
So, when a little bit of deal flow comes in, and it's consistent, then that can create a little bit of a mini tsunami on the insurance. And, that's what I was fearful of. We saw the years low breached on the S&P 500. Usually that's the headline that people are watching, and it's typically low volume environments. The Russell's already taken a swan dive, and it's on its way down doing the Wiley Coyote thing. It's just reaching around for the yike sign.
It's a tricky time of year, and that's what has me nervous. That's why my panic button was pressed, and I'm looking for the emergency room, my panic room, and soft padded walls to rock gently. And, reason why I was worried was because of that sentiment shift that you described, and it wasn't going to take much to roll it over. And, if everyone else was thinking, you know what? I'm just going to cash out, I'm going to cash out, I'm going to cash out, suddenly you've got a repeat of what we saw last February, where you've got this pandemonium sell off. And again, that's going to be a bad thing if that speed of movement that we saw earlier in the year happens. But, just to have it happen at the levels we're at now, that would create a potential crash in the markets.
Sean Donahoe: Yeah. And, I agree.
Phil Newton: A bad one, because it's just going dig the waterfall of those circuit breakers that we saw. It really has me nervous, it really has me nervous of where we're at. Again, it goes back to what we were talking about a few weeks ago. We were thinking about location. If we see a sell off, it's not necessarily a big deal, but from the location, if we saw it ... I mean, when we were last talking about the October, November highs, if the S&P was up at 2,800, and we saw a similar sell off to the same size and magnitude of last February, then if we saw that it was going to be painful, but it wasn't going to be such a big deal, because we've got wiggle room to absorb that sell off, and still not break the years low. But, if that pandemonium move happens now, oh, look on the low, it's going to be painful. Really painful. That's why I'm nervous. Low volumes.
Some big fish comes in, because you were worried about that. Again, similar thing, we were talking about it last year. It's not going to take someone with a large amount of money or capital just to tip things over, and It's going to be painful, and it would ... I'm really anxious about that. I've got to admit, this is the scenario that keeps me up at night. And, don't get me wrong, the portfolio is balanced enough to profit from it, but I just think practically it's going to be a bloodbath, and that's the thing that really has me concerned right now.
Sean Donahoe: It's absolutely true. Now, here's the thing, they consider a bearish market being 20% dip. Now, from the highs in September, we were at 29, 39. And, right now, as of yesterday we're at 14%. 14% from the highs, still considered correction territory. We're not quite in the bearish set, but we're quite a way there, which is why a lot of people are nervous. Now, one thing I've got to say, and again this is something that we talk about a lot. My portfolio is doing great. I mean, again we're not-
Phil Newton: It's not been easy, but it's doing fine.
Sean Donahoe: Yeah. But, we're well aware of what's going on in the market. We've been able to profit when there's been pops, and we're looking again, lower highs, lower lows. We can see what's coming, and it's something we've been waiting for, for a long time. We've been talking about it since the very first episode that we're waiting for the markets to tip over, because we've been on this multi year bull run, eight year bull run, nine year bull run, and everything else as it emerged, but we knew that there was time for aggression, we'd been talking about it, and been waiting for it.
This year has been range bound, going a little bit sideways. April to September, like I said, it continued it's bull move, but since the election of 2016 and everything else, it has been a continued bull cycle with a lot of momentum. But as Phil said, with the very low volume environment, a sentiment shift of epic proportions, and also we've got something that again is going to be more of an effect for 2019 is we've also got a shift in the house. And, I don't mean in the house, raise the roof, or any of that bullshit. I mean ...
Phil Newton: That's the glow sticks.
Sean Donahoe: Absolutely. I'm talking about the government. The Democrats have control of the house, they're going to be coming in, in January, and they have the express intent which has been well telegraphed of obstructionism to anything that is trying to be done by this administration, and also we've got all of the Nazis who are going to be saying, "Oh, well we want to be president in 2020." That's going to happen next year as well. So, there's a lot of ... Again, we've had a very positive ...
Phil Newton: Posturing. Let's be polite about it, lots of posturing.
Sean Donahoe: Yes. There is a lot of swinging of appendages to which we will not mention, but at the end of the day, again, it is going to be an obstructionist agenda. What has been up to this point pretty positive for the economy. The one thing that has been a concern obviously has been China, which has been a very steadfast application of intent, which has had a lot of businesses nervous, but they have stood firm. Although we have this temporary truce in terms of tariffs, we're expecting positive things to come out of that.
Some pundits, and I put this in quote, and some people I actually do respect who try to avoid punditry, but they do have expressed very steadfast opinions, are talking about a big pop at the beginning of the year, and into Q1 if the China thing ratifies, and everything else. And, there are some other bullish signs that we, again, they're believing they could well be a nice pop if that China thing ratifies beginning of the year, or after Christmas, or during the New Year period, and everything else. That will be interesting in itself, but is it enough?
I'm starting to think again from where we are in the charts, it's not quite enough, and I really do think that next year we are going to enter into a recession. That is from what I'm observing in the markets. The cycles' repeating, and again, the pressure valves that we've been talking about, I'm not quite wanting to put a rubber stamp on it, but my gut is telling me recession next year, and I've positioned my portfolio accordingly. Actually, I was telling Phil this yesterday, I think it was that actually a lot of my longterm investments, I've put them in cash right now waiting to see.
Phil Newton: Oh, we've spoken about it on the podcast a few times, and we've touched on it a few times, but yeah, I mean if you're not sure about these markets, which is not a bad thing. I mean, when you're in doubts as to what's going to happen next, that's okay, and holding cash is a perfectly acceptable decision for anyone's longer term portfolio.
Sean Donahoe: Yeah.
Phil Newton: I mean, short term, you can maybe nimble in and out. I mean, to be fair, I mean my time horizons average is of 20 days and up to 45 days. Right now, I'm trying to be as nimble as possible. I'm focused on very short term day trading opportunities, maybe a day trade of some days.
Sean Donahoe: Yeah. You're back into the day trading. I'm still doing a lot of the swing trading, and my time horizon, yeah, about 20 days to 60 days at the moment for that. And, I'm actually moving a lot of my investment portfolio back into that to be nimble. And then, I'm just wondering whether I'm going to continue and pick up some discounts, which I did with Amazon, but I put it back into Amazon that took another wee hammering, and I'm like, okay, well I cut that out. And, again still broke even on that. I'm like, okay, you know what? I'll hold it out of that for a little bit. But yeah, moving a lot of allegations back into swing trading is where I'm more focused on, because again, the opportunities are right there for the short snap moves.
Phil Newton: Absolutely. I mean, I'm not trying to spend all day, day trading off one minute charts, it's 1360 minutes. Following my own philosophy, yes, I'm going to spend a little bit more time at the desk, but it's still between one and three hours, and it's very passive. It's your check in every 30 minutes type of thing. So, it's checking every 30 minutes, then go, and do something else. Check every 30, you go do something else.
If you're at the desk anyway, which I am at the moments, it's not any extra effort, just have a quick glance, set some scans, look at the two or three stocks that meet those criteria, do I want to trade it right this moments? It's that same prediction and experience just brought down to short term cycles. And, usually you'll see something in the first 60 to 90 minutes, and if nothing's there then there's nothing there. But ultimately, that's where my focus is, because the volatility, the price volatility at the moment is just absolutely phenomenal. It'd just be rude not to have a little dabble chicken nibble.
Sean Donahoe: Absolutely. Absolutely. Chicken nibble, I like that. But, at the end of the day, I mean, here's the things we've been talking about this for a long time, awareness. Everyone who's listening, awareness has been raised. I mean, we've broken the years range lows as well as the three month range lows. I mean, we have been talking about this, I mean, for a long, long time.
Phil Newton: It should be no surprise though, when it happens. Oh, the markets are selling off. It shouldn't really be a surprise. We've been talking about it, we've been fearful of it for a long, long time. Now that it's actually happening, it's damn painful to sit through to watch. Because, to be fair, I don't want to fast sell off. We were talking last time, I'm 47% bearish in my portfolio. There's also neutral strategy, so I can benefit at 60% of my portfolio if there is a crash. I'm not go to the pool house is the point here, but I don't want that to happen. It would be bad for a crash, it's bad for the economy. That's what I don't want to happen. That's what I'm fearful over, but at the same time, there's still the bull talking heads are talking bullshit essentially.
How can you be an optimistic bull? Is this a buy the dip scenario? No, it's not. I don't think we can qualify that. I mean, if you'd asked me ... What you did ask me this time last week, I was still an optimistic bull. It was a nervous bull, but I'm not going to pretend that hey, from the price charts point of view, I think behavior is dictating that we're going down, and we're in bearish territory, and I'm looking at more sell offs in the individual stocks than rallies. And, that's a concern. And, for anyone with their eyes open, they're aware of this, and they're strategies will have been positioning themselves bearish as the individual stocks to an opportunities turn arounds, the fact that the index is now catching up would be individual opportunities, that should not be a surprise. It really shouldn't be a surprise.
Sean Donahoe: Now, that's exactly it. I mean, we've got a lot happening next year. This is what we're talking about with this show is okay, what's happened this year? What's going to happen next year, so that you can take advantage of it for 2019. And, as Phil said, I mean, we're in a position to really profit from the downtown market. We've had the awareness raised, we've been ready for this, we've been switching, shifting portfolios, allocating funds accordingly to the changing environment. We've been talking about this a lot. We don't want a crash, we want a controlled descent. Not because we will profit, it's hugely not good for an economy. And, that is ...
We also have concerns for every other Joe blow who's got their 401K match with the index, or all the portfolios that make up their 401ks that all the mutual funds that people have put their life savings, those are not good scenarios. Those are what we're concerned about there. From our own personal standpoint, we're happy campus. Its happy days.
Phil Newton: Almost like people have got such shorts term memories. And, 2008 was not that long ago really in ...
Sean Donahoe: It wasn't. But, you know what? And, I was thinking about this, I was talking about this with a friend of mine who's a fund manager.
Phil Newton: I even went as far as watching the videos in the weekend.
Sean Donahoe: It's funny, but yeah. We were talking about this yesterday, that you had mentioned you watched the big Sean. But, I was talking with a friend of mine who's a fund manager, and we were saying that people have very short memories, but also a new generation has almost emerged that started now to be investing while thinking about that. And, it's like they're completely oblivious to this because it's 10 years later, and it's a complete new batch of people who've had no financial awareness or interest in finance that are now putting their money in the markets through their 401ks, and through mutual funds are becoming savvy.
Phil Newton: There's lots of apps that are aligned to invest to change, and stuff like that.
Sean Donahoe: Like Robin Hood, and everything else. Yeah, they're doing all that kind of thing.
Phil Newton: Yeah, I mean-
Sean Donahoe: But, they've not got awareness of history.
Phil Newton: It's good from the points of view. Yeah, and it's good from the point of view that they're able to get exposure, and take control even in a small way with their finances, and investing. It allows you to dip your toe in the water essentially, but if something significant happens, is it going to be life changing in a negative way, because that's what we saw in 2008 where literally people's retirement funds, pension funds, everything just disappeared for most people disappeared overnights, and that was not healthy.
And, people have forgotten that, and not really learned the lessons. And, surprisingly we're seeing similar warning signs and markers for things that happened back then, they're doing exactly the same thing again now. It's no surprise, nothing's been learnt. Yeah, sure, regulations might be a little bit tighter, it's a little bit more oversight, but the same things are going on.
I've got to admit, as you've already gathered Sean, the crash really is at the forefront of my mind, and I'm really worried that it could happen. I mean, I remember back in 2006, early 2007 when we had a live trading rooms. I remember jokingly talking about it back then, so all we need now is a crash, and then all these pieces of the puzzle just slotted into place when literally made a random off the cuff, oh look at that squirrel type of comments. And, actually I know I was joking, that is a serious possibility. And, for a year, year and a half, I was naysaying with my sandwich board saying it's common, it's new. As soon as I had that realization, it's like, oh my God, why are people not seeing this? Literally, why aren't people worried about the situation? And, there are similar things going on right now.
The Western world is printing more money than we can handle, yet that's not been impacted into the economy. When you've got more of something, it gets worth less, no one's noticed. We've called it quantitative easing. We can fudge the numbers, we've got this artificial buyback program for companies, so they inflate profits artificially, then massaging the books, again legally they're doing it while passing the tinfoil helmets. It literally is, there's no justification for a nine year bull market. No justification whatsoever. That has me nervous.
Sean Donahoe: Yeah. Well, there again, and it's funny we've been talking about this, why the nine year bull market existed. And, I think there's a lot of it again, is the-
Phil Newton: A permit that came out that didn't show off.
Sean Donahoe: It did. It did. Winnie the Pooh.
Phil Newton: A permit that just came out, and rot.
Sean Donahoe: Yeah, Winnie the Pooh, that's what we're going to call it.
Phil Newton: The optimistic Pooh has truly been shot dead in the last week. Jeeves, fetch me my tin foil helmets.
Sean Donahoe: Indeed. Indeed. But, yeah, I mean we've been talking about why the nine year bull run, and I think a lot of what we've been talking about with change in administration, I think this one was again for a business a lot of deregulation help, speed of information, availability of the ... A lot more telegraphing of what's going on. I think that underpinned a lot of what was happening. The quantitative easing, which we've been talking about for a while all the way back through the last 10 years, and everything else. I mean, there's a lot that brought up this, but again, we have to have a pressure valve, we have to have .
Phil Newton: We need a reset.
Sean Donahoe: And again, a reset. We just don't want it to be a violent reset. But, looking into 2019, what are the things to look for? Again, change of power in the house that we mentioned, an obstructionist agenda, a lot of political turmoil. We've got the ... Eventually the Mueller investigation should be over. For the love of God, please just make it stop. Let's just get that done. Whatever the findings are, good, bad or ugly, I don't care, just get it over.
Phil Newton: Pull a one night off.
Sean Donahoe: Right now-
Phil Newton: Maybe Brexit will finally happen. Maybe it won't, who knows?
Sean Donahoe: Don't even get me started on that one. What, did they pushed it back now to January 20th, or something like that?
Phil Newton: We're mostly going to be having another votes, because they did what the Irish did. Well, we didn't like vote, let's do it again.
Sean Donahoe: It's the stupidest bullshit.
Phil Newton: We didn't like that results, and the public has voted, or we didn't like their results, so let's just ignore it and do another ballot votes.
Sean Donahoe: Bloody ridiculous. Don't even get me started on that soap box, but we've got the trade war. Okay. Is that going to emerge positive, or is that going to ratify itself? We've got the dollar trending up nicely. We've got unemployment still at record lows, we've got the political eyes on 2020 when star people are starting to make their announcements. We've got real estate sales slowing down, house prices are still going up, and builders are seeing a lot of slow down in the demand.
And, again we've got an oil slump. I mean, these are things that are in 2019 I think going to be the big moving factors. Really at the end of the day, I think be balanced, observant, be ready to dark and leave, and keep that awareness rocket.
Phil Newton: I think it's also worth mentioning that despite Phil's tinfoil hat predictions, this is just purely from a financial markets, and from price behavior viewpoints, and this is what I'm thinking today. And, this can all change very quickly as we know, but I think the economy as a whole, as you just highlighted there Sean, the economy for the moments as a whole it's pretty solid. There's no economic shifts that would signify Phil to panic essentially. This is just like I think the financial markets shift.
Sean Donahoe: It really is sentiment shift. It's just sentiment.
Phil Newton: Yeah. I just want to draw that distinction. I think it's just worth pointing out, because price behavior is telling a different story to the economic situation. And, fairness despite the excessive printing of cash, everyone in the Western world has done the same thing, so it kind of on balances out. But yeah, it's ... I mean, economy is strong, jobs are still there. So, it's okay at the moment. Not fantastic. Everything can always improve, but it's okay.
I mean, what's interesting is that these things they don't happen overnight, economic shifts. I think from the economic bear markets point of view, you need that to back to back quarters of economic contraction. We're not seeing that yet. So, from that perspective, there's nothing significant to panic over.
Sean Donahoe: Absolutely. Right now, yes. I think the sentiment is going to be the big moving factor. It's going to be the whole herd of wildebeest changing course. That is a concern, but fundamentally it's gay moment. It's that same shift.
Phil Newton: It's still okay. It's still okay fr now. We've not got the economic contraction that would signify a fundamental bear markets. We're talking about the price behavior is telling us one thing, but the economic situation is it's okay for the moment.
Sean Donahoe: Absolutely. So, conclusion.
Phil Newton: Oh, such a-
Sean Donahoe: Absolutely.
Phil Newton: Conclusion, yeah. Just put your tinfoil hats on, put the duvet over your head, and ...
Sean Donahoe: There you go. Yeah, yeah.
Phil Newton: And don't-
Sean Donahoe: Be balanced, be observant, be aware, get ready to duck and leave and adjust, and make it good. So, with that being said ...
Phil Newton: I just got a final word Sean. From a trading point of view, the thing that gets me through is everything that we've just spoken about is opinionated. I'm biased one way, Sean's biased a slightly different way, that's okay. It's an opinionated view points. And, as you know, my opinions change with the wind.
Sean Donahoe: Always change of mind as we say.
Phil Newton: Exactly, yeah. But, the message that got me through it, the thing that gets me through it, is when you've got a robust strategy that performs in the longterm, put your opinions on one side, and trade the setups. When a trade sets up, the trade goes on, and that is the thing that has got me through all these uncertain times, the what should I do. And, last week I was optimistic bullish, this week I'm thinking doom and gloom, it's opinion. Every time you get a new piece of information, and you absorb it, you're going to have these reactions, and again, they're all opinionated. But, when you've got your strategy, you get back to basics, put your opinions one sides, when the trade sets up, the trade goes on. Follow your strategy. That's the thing that keeps me sane.
And, to be fair today and yesterday we spoken about Sean, while my strategy is designed to find something to trade everyday, nothing's actually set up. That's a telling sign, and in fairness that normally happens around this time of year for the reasons that we mentioned, it's typically a quiet time of year. We're not seeing any swings and setups that would typically develop, and that's normal for this time of year. So, straight sets up trade goes on. If nothing sets up, don't put the trade on, it's as simple as that. Follow your strategy is the final word.
Sean Donahoe: Okay. With that being said, let's move on to trade fade or evade. So, I'm going to fire some banking and finance stocks that have been taking a wee bit of a hammering. So, I guess the first one we have to look at is Goldman Sachs, which is in a lot of hot water. They have been taking a serious hammering after being confronted by different foreign governments about some of their practices. I won't say more than that, because we don't really need to.
Phil Newton: Really? You mean the fact cats are being pointed out that they're fat, and they've got too much green?
Sean Donahoe: Absolutely.
Phil Newton: I'm not surprised. Look at the rally, it's bearish, there's no hesitation there.
Sean Donahoe: Absolutely. I mean, for a short pop, I'm actually in this one right now for a short pop. I am doing the counter trend on this one, but I'm going to be screaming out like flint.
Phil Newton: I was just thinking from a bearish point of view, you've got a nice little gap fill. If we see this turnaround in today, might be nice for a little further move lower. It looks like the rally is ... Just looking at the very short term last two, three weeks, the rallies aren't lasting more than three to five days. So, that could be a good indication.
Sean Donahoe: Yeah. I was in this one yesterday, and for a very, very quick opportunity, but I expect to be out very fast indeed. The sooner this little rally has ended, I'm out. But, yeah, longterm, yeah, this is a bearish. I might sell that rally as well once it pivots, because I really think that the political strife that they're under is going to continue. But, yeah, that's a very quick, quick, quick in and out for me. And then, might sell that rally indeed. Next one Wells Fargo, WFC. You're playing along at home.
Phil Newton: It's the same deal, isn't it?
Sean Donahoe: This one's been pretty much ... It's broken the range lows for the last 12 months as far as I can say.
Phil Newton: Yeah. I was going to say sell a rally, but I don't think it's going to rally.
Sean Donahoe: No, I don't think. I think it's holding, and I think it's going to drop.
Phil Newton: If it got back to $50. I mean, we've got a very obvious baseline around the $50. It's been consolidating for probably the last two years as you were just saying there Sean. But, I think if it did run at the $50, that's going to be a great opportunity to sell a rally. I don't think it's going to rally. It's just been literally pausing for last two, three days. If this goes below the lowest $46, we could see this drop probably eight to $10 quite quickly.
Sean Donahoe: I think so as well. I agree with that 100%. Okay. Bank of America.
Phil Newton: Just one second Sean. I'm actually just putting Wells Fargo on the watch list, I'm going to keep an eye on that one. I like that a lot.
Sean Donahoe: I thought you might.
Phil Newton: I had it on a watch, just probably took it off. I was looking at on the weekly charts, you've got this head and shoulders pattern, and for whatever reason I took it off in watch list, and that neckline break $50 it's looking ... I'm gleefully rubbing my hands together as you can just hear, it's looking juicy. I'm going to be all over that like a rash on ... Well, let's not go there. What's next?
Sean Donahoe: A moment of negotiable affection. There you go to use the ... Anyway, that's always. Okay, so Bank of America.
Phil Newton: Bank of America. Okay, now I think it's the same deal. It's not as obvious a consolidation, you've got a downward sloping channel for most of this year, and it's very clearly gone below the boundary levels that it contained for most of this year. Yeah, it's sell a rally. I don't think it's going to rally, because if it was going to rally, it would have done that, and the last four or five days, it's just drifted sideways. And, which might suggest that it's just not got any energy, or interest in rallying. So, if it breaks below the lows and run about $24, I think we're going to see a hard and fast move just eyeball it to about $5 move down, so maybe down to $19.
Sean Donahoe: Yeah, I'd agree with that.
Phil Newton: Yes. What else on my watch list?
Sean Donahoe: Now, the interesting thing is you'll notice this on this next.
Phil Newton: I like them. I like Sean.
Sean Donahoe: Charles Schwab.
Phil Newton: I had a day trade on that last week.
Sean Donahoe: Yeah, there you go. SCHW.
Phil Newton: .
Sean Donahoe: Yeah.
Phil Newton: I had a little day trade on that. Nice, nice, nice. It gapped down just a few days ago, and today anyway gapped down. But, yeah, I can say daily consolidation most year it's already broken down in October. It's already pulled back to the breakpoints around $49. If you wanted to see what could happen with the other two stocks that we were just looking at. If you saw the rally, this is what it would look after the rally, after its continued if you want a before and after consolidation breakouts. I think it's the same deal, and no surprise there, breaks below $40. I think we're going to see a fast move.
Again, just looking in the previous couple of moves that are about eight to $10, the next move is probably going to be about eight to $10, so from 40 down to maybe 30 would be a fairly logical targets, maybe quite speedy as well.
Sean Donahoe: Interesting.
Phil Newton: I think it's looking juicy Sean. You picked a good one this week.
Sean Donahoe: Indeed. Now, here's the thing, pull up this next one, JP Morgan Chase, JPM.
Phil Newton: JP Morgan Chase, interesting. It has just broken the low, big psychological round numbers will catch my $100. That's going to be a major factor. It didn't quite break the range lows, which is a little above 100, about $102 by the looks. I can just eyeball on it. It was not like it broke in the same way as the other banking stocks, because it moved quite far off through that boundary low, whereas this hasn't. It's just flirting with it, which makes me optimistically bullish in the way that we've been talking about the markets, and the broad market the SP 500.
Sean Donahoe: Now, you want to see a little observation are going to fire at you. Like we said, we had the dip in April all the way up to September when we had our highs on the general markets.
Phil Newton: Same dilly.
Sean Donahoe: Then, we had the dip from September down to where we are right now. But, are you noticing ... This is again banking sector, so finance, which is always very reactive regards the broad markets. But, you'll notice that a lot of these stocks from April to September rather than spiking, or going higher, like the general markets have, these have all been sideways right up to September, and then they're dipping hard.
Phil Newton: Yeah.
Sean Donahoe: And, they're doing that downtrend. So, it's interesting to see that even though the market picked up a lot of steam from April to September where it set new highs, all the finance tend to be sideways. They tend to be not reacting in a bullish manner, but now that it's tipping over, they are breaking those range lows. And, pretty much every stock we've looked at has done that. So, that is very broad market, and what has happening into the economy as well.
Phil Newton: Well, even though the ... I'll just come back to the S&P 500 on the futures, the way that I view it, we saw a fast hard movement back in February, but we took several months, slow, lazy, very narrow ranging days to get back up to retest the years high, and then we're seeing fast sell offs. So, it's that speed of movement that we talk about. It's the big red candles are bigger and wider ranging than the bullish green candles.
Sean Donahoe: Yeah, very much so.
Phil Newton: So, that for me, it's a highlight of momentum. Again, using the same philosophy on this. The red candles, are big red candles, the green candles which are bullish the small, narrow ranging. So, yes, while it has been rallies, the sell offs have been harder and faster than the rallies. That's the momentum, the bias, the sentiments if you like from reading prices certainly on the bearish side from all the stocks that we've just looked at.
Sean Donahoe: Very true. Okay. Next one, US bank, USB. You want to talk about one that's firmly broken its range lows, this would it.
Phil Newton: Just breaking it, yeah. Just breaking it lows. Just eyeball it around about $49 level. And, yeah, again, hard and fast sell off. Again, same philosophy, just picking up on the observation that you were highlighting, big red candles all of this year, green candles, bullish candles, really small, narrow ranging, very struggling to rally. No surprise that we're probably seeing prices break, seller rally. We've not yet had same pause that we've seen on the new stocks, so maybe we will see a bit of a rally on US money Corp. Yes, sell a rally on the downtrend. It's pretty straightforward type of setup. Lovely break of the low.
Sean Donahoe: Another one that keeps popping up on my radar, Synchrony financial, SYF, that's the break off company that was GE financial. And, if you look at that one again, that is-
Phil Newton: Sell the rally.
Sean Donahoe: Definite, definite.
Phil Newton: Sell the rally.
Sean Donahoe: Sell the rally.
Phil Newton: It didn't even trade range for most of the year.
Sean Donahoe: No, it just gave up.
Phil Newton: It just gave up. Yeah, Just gave up while-
Sean Donahoe: Like GE did.
Phil Newton: Yeah. It's just rolling over and picking momentum up on the downside. The rallies are getting smaller and smaller and smaller.
Sean Donahoe: Yeah, very much so. That is, if you ever want to see a rubber balls bouncing, this is what it is, just the bang bang, bang, bang small.
Phil Newton: This is the weakest looking stock out there. But, for all the reasons, and a whole lot more, yeah, that looks good. I mean, are we going to get a rally? Probably not. And, breaks the lowest, buy some long puts, long dated long puts. And, you just close your eyes, and sit back, and cash outs. As you can probably gather, I'm very bearish.
Sean Donahoe: He is. We are going to call him Phil Winnie the Pooh Newton. That's his ...
Phil Newton: Bear humbug.
Sean Donahoe: Indeed. Bear humbug. But, there you go.
Phil Newton: It's just, I know that the financial stocks are a representation of the broad market, so it's not really a surprise that we were talking a lot about the SP 500, the broad market indexes. We're going to see something similar in the financial sector, because there's a high correlation, so it's not surprising that we're seeing that. It just really reinforces what we're seeing here. The typical stocks that lead the way, lead the charge when things are going great are not looking great. And, they're already moving down, and they're not even rallying. They're waiting for the next push down, so we're probably going to see that translate into the index, because it's an aggregate of not just the finance, but lots of other things that combine and makeup the index in the first place.
So, the fact that we're seeing the financial sector having already tipping over, and breaking lows very confidently breaking new lows, you'd be looking to sell the rallies. We're going to see that translate into the index. Again, now that I've seen that, I've got no hesitation in taking the tinfoil helmets off, and being quite confident to be bearish, just based on what we've seen so far.
Sean Donahoe: Absolutely. So, that is it for this week's show. And, this is a reminder real quick, there is no show next week. I always give my team the week off in all of my businesses, that is between Christmas, and New year's, so we are taking the week off. We will be back, the next show is on the 2nd of January when the markets open same day. Looking forward to what's happening in 2019. So, from all the team here at Trade Canyon, have a very merry Christmas, and a fantastic New year. And, there you go. So, thank you for listening to the show.
Phil Newton: Phil's going for therapy by the sounds of it, after his conspiracy theory. I'll be attending therapy for kohler.
Sean Donahoe: There you go, that's it. That's why we're actually doing this. We're putting Phil in a mental home.
Phil Newton: No one's going to be in a padded room, so he can't injure himself.
Sean Donahoe: There you go, there you go. As if he isn't already in that padded cell right now with a microphone. There you go. We'll pretend that he is.
Phil Newton: But, if you would like to connect with us though, you can get to us on the social things, Facebook, and the Twitters, and so on. You can find us at the same link And, we do answer our emails. If you want to get to us on the email, you can contact [email protected], and for me it's [email protected]
But yeah, look forward to hearing from you if you want to send a virtual Christmas card. Any well wishes are always welcome. We certainly like our egos stroked, and yeah, have a very merry Christmas, and a jolly holidays, and the new year.
Sean Donahoe: Absolutely. See you next year. Take care for now.
Phil Newton: Bye for now.
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3 Key Takeaways From This Show

  • Be smart, be aware and balance the portfolio
  • History repeats itself, look for the patterns
  • Work with the numbers and not the hype

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