September 2020 Video Call

Hey, good afternoon. I'm Andy Snyder, I'm the founder of Manward Press, of course. And welcome to this month's special September video call. Whether you're a subscriber to Alpha Money Flow or Codebreaker Profits, welcome.

I know there's a lot of new folks to the call this month, so congratulations for joining. I think you joined at a fantastic time. I've been saying for the last month or two that this is absolutely the best time to be an investor. The markets are, for whatever reason, we'll get into a little bit of it. For whatever reason, they're red hot. We got a lot of buying activity, a lot of buying opportunities, I should say, and just a lot going on in the world of Wall Street that makes this a really interesting time and a really good time to be using a unique trading service, especially as we focus on trading volume and some of the technical indicators we use.

So today, I don't have a ton mapped out. I have some good questions, the questions I see a lot from readers. At the end, I'm anxious to get to those. But I also have a macro look at what's going on after this week sell-off, after the long run we saw over the last month or two, really going back to mid-March, what's going on there. So I really want to look at that and give you a good glimpse of where I think the economy is going, where markets are going, and then what that means to us as traders. So let's dive into it. I got a presentation here. I'm just going to go through the slides and we'll go from there.

All right, so the theme of this week, if you've been paying attention, it started last week with a pretty big sell-off, started in the tech sector route there. The theme of the week is absolutely cooling off. So, I wrote it in an alert to Alpha Money Flow subscribers this morning. Really, what happened over the last few days, last week or so, was the market's sprinkler system coming on. If you think about it, if you know how sprinkler systems work, there's a little piece of metal in there, when that thing melts, the sprinkler turns on and cools things off and keeps us from getting burned. That's exactly what happened in stocks over the last week or so, the sprinkler system came in and cooled things off, if you look at the peaks of the market, the top blew off of it. Nothing concerning, nothing really, no big macro trend, no big turnaround, anything like that. We can see it here in the chart. Let me move my picture here. Put that up there.

All right, so this is the chart. It includes some counter channels, some things from Alpha Money Flow, EquiVolume charts. If you tuned into the Super Trader rally last week, you saw my thoughts on EquiVolume, love it. So here's where we're looking. And you can see clearly off to the right-hand side here, these big red boxes, big long boxes, not really wide, which is really what I want you to focus on here is the volume. So this chart, the wider the box, if you missed the rally, the wider the box, the more volume we're seeing. So really, we're seeing volume waning here. The box is fairly wide, getting a little bit smaller, getting a little bit smaller. And they're also getting shorter, which means the inter-day, the volatility is less, until we get to the beginning of September when we have a little bit wider of a box and that big swing down.

But what's really interesting, what's important to note is that box is not wide. There's not a lot of volume, there's breadth of selling. So it's just folks again, hitting that top, hitting technical indicators, whatever, pushing things down. Nobody en masse is saying, "We need to sell everything right now." Which is why this mid-channel support line if you look, this is yesterday's action here, got right back up to that mid-channel support. And that's going to either be a little bit of a barrier or it's going to act as support gets over there. So we got to watch that over the next few days, this 3,400 level on the S&P.

But you can see, RSI got into oversold territory. Again, a great technical, very reliable indicator. Then here at the bottom we see money flow or the Liberty Indicator starting to dip, but we certainly haven't gotten into the red, which is usually where the trouble starts. We'll want to see a turnaround from here to watch that get back above that 0.2 level. I think that'll happen. I think we just saw some selling off here, nothing major. But again, we're going to watch that volume. If these boxes start getting wide, as we get down here below this mid-channel line, that's something to be a little more concerned about. But if we get back up above that line, either on strong volume or even smaller volume, we'll be fine.

All right. So, every month I go through the fear and greed index from CNN, it's pretty helpful. And I apologize for the fuzzy charts here. But this is just the CBOE, the five-day put/call ratio. So how many puts are selling for how many calls are selling? And yeah, I've been commenting on this devil horn formation, not a true technical pattern that I know of, for months now. But you can just see the general trend is that more calls are selling than puts. We see it spike up a little bit, but we got into really low territory here at the end of August.

Again, things just got overheated. Nobody was thinking about the downside. And when that happens, Mr. Market likes to come in, crack the whip and say, "Hey, pay attention. Things can get bad." And so that's really what we saw here. Put buying picked up like it should and I think this trend should and hopefully, will flat line from here. We don't want to go to too bullish, because then things can get crazy, we get big sell-offs and people can get burnt. We want to be, especially as traders, we want that volatility in there to take advantage of that, get those buying opportunities and jump in. So this chart is overall, not super bullish, but it's certainly bullish.

All right. So this is the S&P 500 and its 125-day moving average. I remember last time we talked, this big peak here above, what is that, the 3,700 level, was something that we absolutely had to watch. And I mentioned a pullback was... These lines, the 125-day moving average, this lighter blue and then the darker blue, they eventually will converge and either the moving average will move up or the index will move down. And here, we can see that the index move down, just as we'd expect. Now we'll see that 125-day moving average start to creep up and close that gap. And that's just, again, very normal selling off, cooling things down. Again, not extremely bullish. We were extremely bullish when this gap was huge. Now we're just into, I'd say a healthy bullish stage, which again, I'm excited about.

All right, so here's the VIX. If you're a VIX trader or if you're a fan of volatility or you don't like volatility, pay attention to this chart because the VIX went above. So the VIX, if you're unfamiliar, is a measure of volatility using S&P 500 options. It's called the fear gauge. I think that's a bit of a misnomer. It's just showing how much the market expects prices to move in one direction or the other. When the VIX is low, we don't expect much movement; when it's high, we expect a lot of movement. And a lot of times, that's considered fearful because a lot of movement is in a downside, but it can also be the upside. And we saw some of that disconnect last week, and it surprised a lot of investors that haven't been paying attention.

But what we see here is the VIX went above its 50-day moving average with all that volatility we saw over the last week or so, now it's coming back down. I don't expect it. You can see on this chart here, we've been naturally hovering around the 50-day moving average and staying below it. I don't see any reason why we wouldn't get back in there. Washington is talking about stimulus, the ECB was out this morning, talking about interest rates and bond buying. Nothing really has changed in the macro sense. Unemployment numbers are flat-lining, doing when their thing, slow recovery. I don't see any reason to have a big spike in volatility.

All right. So this one, oh boy, a lot of colors. This is just a way of visualizing that the stock market. I'm trying to figure out the best place for me here. We'll just do that. You can see this is a three-month visualization of the S&P 500. So you can see Apple is up 30%, Amazon is up 20% again, over the last three months, Google is up 5%. Some big, big things. You can see down here more in the interest-rate-sensitive area, utilities, they're down, energy is down really big. Exxon down almost 30%. Chevron, 20%.

So over the last three months, we can see just what we've been talking about with the headlines have been hitting on. Technology is big. Financials are OK, depends on the consumer side of things. Home Depot has been a big one, I've been writing about as far as buybacks; the home DIY trend is huge. And Amazon, of course, is doing really well. And then utilities are pretty flat along with real estate. Real estate is going to be interesting to watch. A lot of headlines out there this week about inventory and that sort of thing. I think it's a lot of fluff and the real estate industry is going to have some ebbs and flows, but I don't see a major housing boom on the horizon by any stretch.

But let's look at the same chart for one month. So watch how the colors change here. Pretty dramatic, right? So, Microsoft is down 5%, Apple is down 1%, Google is... Oh, excuse me, Apple is up 1%. Google is up 1%. Basically flat over the last month. If you look at the S&P, if you look at most stocks, things are pretty flat over the last month. The utilities are still lagging, but the tech is still holding on or still leading the charge forward. The financials, Berkshire is in there, since Berkshire has been in the news a lot. Warren has been doing some interesting moves. I think he's been a better leader lately, some of the things he's been doing, which is good, I'll take that.

But then, let's look at this for the last week. So, no surprise here. But the reason I've put this in here is to show you that again, the utilities, the interest rate sectors are doing what they're supposed to do, keeps things at an even keel. It's a pretty boring even keel right now, but compared to Amazon dropping 9%, Microsoft down by double digits, Apple down 13%. Again, we saw those big companies were that really getting up to the top, to the top blown off of them and come back down. And now we should start to see some leveling off and getting back to a sense of normalcy. I mean, we saw last week with Apple and Tesla stock splits and people were just pouring into those stocks now that they were cheaper, just shows that the retail industry, the Robin hood trade, as we call it, is really hot right now. And again, Mr. Market comes in and sees that hotness, fires the sprinklers and cools it down. It's exactly what we should expect.

All right. So, summarizing all of that, what to watch. So, if you've been around for any length of time, you know I'm a huge interest rate wonk. They're the hormones of the economy, as I say. They're driving everything. But I have a question mark here, as far as interest rates, because nothing is changing. The fed is meeting next week. I don't expect them to cut, I expect them to do some other things. They're going to have to start coming after cash, they're going to have to start doing some behind the scenes things. I'd be very surprised if they did anything directly to interest rates. The 10-year treasury has been pretty flat, that 0.66 to 0.7 range, nothing too crazy there.

So interest rates are pretty steady, which explains why things are leveling off over the last month. Again, that last monthly chart was pretty rad because things in the interest rate world, which is the main driver, is holding pretty steady, so I have a question mark there. I'm not watching it as closely as I have been for the last year or so. And until we get some bigger macro things, I don't think interest rates are the thing to watch.

Elections, it's overdone. You know it, I know it, we're all sick of hearing about the elections. The media is all about it because there's money behind it. There's ads, you can't go online without seeing a political ad and it's being covered. But as far as Wall Street and your investments, there's not a whole lot of variability there. Maybe on November 3rd with the election, we'll see some moves, but I don't expect much. There's a lot baked into the market already. The market is pretty smart. It knows there's an election coming up and it has done the math and knows what's going on.

Stimulus, this one has some potential. Congress is once again talking about a stimulus package. I think something will come out. If we go back to the idea of the election, this could tie in. Politicians love to use other people's money to buy votes. And so, as we get closer to November, we can see things heat up and vote-hungry or vote-addicted politicians trying to buy some votes and try to buy the election by handing out free money. It's a good idea for them, not so much for the country, but that's something to keep an eye on. I don't think there'll be a big market mover. Again, a lot of that gets priced in pretty early, but it could be, especially for specific sectors. A lot of folks are watching infrastructure. I'm watching infrastructure. So some key things to watch there.

But really, the idea for me, what to watch, if you look at the next week, the next month: volume, volume, volume. And I got chart that hits on that idea. So this is just a plain EquiVolume chart. I got some KI channels on it. But you can see the volume here. Again, the width of these columns, not necessarily the depth, but the width of the column shows the stock market's volume. And you can see, let me move me a little bit here, you can see they're getting narrower and narrower as we get up, and so is that volatility, that day to day, that's what I'm watching. And we're climbing on that high volume.

We want to see that volume come back to really sustain this trend. If we don't see that volume come back, now that we're post Labor Day and getting into the thick of the end of the year, the buying season for retail earnings. If you remember March, the Q3, Q4 were supposed to be the big ones for this year that are going to bring everything back and bring everything positive. Now we got to see if that happens. And a key to that is going to be investing volume. I'll be writing a lot about volume in both services over the next month or throughout the end of the year, as we keep an eye on that. And both of our services are primed to track that, whether it's the Liberty Indicator watching the buying activity or Codebreaker following Keltner Channels and EquiVolume charts. The volume rate and EquiVolume tells a big story. So you're going to see charts like this a fair amount, because volume is very important.

So, speaking of very important, let's get into some questions. Move me down here again. So this is one I got from a couple of folks after yesterday's Codebreaker. No, I guess it was Tuesday's Codebreaker buy. The option moved fairly quickly. So the question is: the option is above your limit price, what should I do? On Tuesday, the option basically jumped out of the gate above my limit price and kept going. And people wanted to know, should they buy it? Should they not buy it? And the answer is pretty simple: no. It's a limit price for a reason. Don't chase it. The market makers will try to move it up, but if your patient...

So yesterday, that same option went back below the limit price and you could have gotten a discount, to everybody that bought it the day before. So be patient, none of these trades are... We're not trying to do anything from one day to the next. These are trades from two weeks, three weeks up to three months or more. So take your time with those options, especially those options, and buy under the limit price. You'll thank yourself. You'll have bigger opportunities. And if that changes, if something changes in my thesis and the limit price should come up, I'll email you and tell you. If not, either wait for it to go lower or just wait for the next one. There's a new play at least every week, wait for the next one. Don't handicap yourself out of the gate by paying too much for something and expecting it to surge higher.

Options are pretty expensive right now. Looking at the VIX the last week, it was pretty high so that means we're paying more for options. And so we don't want to pay any more than we have to because as the VIX comes down, those option prices come down as well. There's some math there that I have to think through, and that's where those limit prices come from. So stick with them, save yourself some money and really enhance your odds. We talk about stacking the deck in our favor, enhance your odds by not paying too much for those options. So stick to those limit prices.

Another question I get a lot, and a lot over the last week: do we use trailing stops with options? So, we typically use 25% trailing stop. We'll tighten it to 15% sometimes from the initial buy, based on volatility. And we'll also tighten it as we get some gains in there for the underlying stock, that's with the underlying stock. But the question is, do we use trailing stops with opposites? And the answer is, no. Again, there's just too much volatility there. We can see a 25% move in a day, that would kick us out. And then the next day, the option doubles in price.

So what we use is that the trailing stop on the underlying. So, if we're an XYZ and it drops by 25% and hits our trailing stop, then we sell both. Then on the other side of the equation is, when stock price moves in our favor and the option price moves in her favor, we'll usually sell half of the option when it hits 100% gain. That's almost a standard rule. It's not written down, because I don't want to follow it all the time. But almost all the time, if we hit 100% on option, you'll see an alert from me saying, "Let's sell half of that. Take those profits, take our initial capital off the table and let the rest ride."

And then of course, as we get closer to expiration, the intrinsic value, extrinsic value, we got to start playing around with time decay and that sort of thing. That's really where hand-drawn math comes into it. You can't just use a trailing stop on there. I have to go in and look at the days until expiration, the volatility, the overall trend, and make a decision on there. So your best bet with the options is just keep an eye on your inbox, sign up for the text alerts, and if it's time to sell, I'll let you know. That's my job to track those. If I think they're worth selling or if it's time to sell, I'll send you an alert and that's what we'll do. Pretty simple.

All right, so what is a trailing stop? Probably should have done this one when first, but a trailing stop is simply a stop that trails the stock higher. So if a stock goes from, I don't know, $10 to $12, our trailing stop follows underneath that. So if it drops back down, our trailing stop will stay set at 25% or 15% below that price, but it won't go back down. So as the stock continues to climb, the stop goes with it and stays 25% below that high. But if the stock comes down, that stop doesn't move, so if the stop goes below it, that's when we sell. Pretty simple. There's a lot of resources out there.

Again, a lot of brokers will allow you to do this. 5, 10 years ago, I would tell subscribers not to put a trailing stop into their broker's platform, because the Moneymakers would see it, move things around. A lot of that has changed. So if your broker allows you to put in a trailing stop automatically, go ahead and do it. I've got no problem with that. But you don't have, because again, I'll send you an alert. If we hit our official trailing stop, then we'll get out. Now of course, our prices is often different than the price you'll see, but we should be really close. If I'm doing my job, we should be really close.

And that's a good point. So, how do we record official entry and exit prices? So, our rule is that after an alert goes out, it hits your inbox, we get it, we get it to our sample inbox, 15 minutes after that is when we record it. That way you have a chance to get in there and the prices are pretty fair. Now, if you don't check your inbox until the next day or later that day, price could be significantly different. I hear from folks saying, "Well, I got in at $3. You recorded it at $3.50 or $2.50. What's up with that?" And it's usually that delay. So, we don't buy it right away because that's usually unfair. We buy it about or officially track it 15 minutes after the alert goes out. Hopefully, that makes sense. Keeps everything fair.

All right. So, can you explain your Dow 100k theory? Oh, I can. It would take a while to get fully into it, so I put a chart in here, but the Dow 100k theory is something I'm really excited about. It's almost equal parts bullish and equal parts bearish. I think that's what confuses folks, but it's really not that nuanced. And the reason I wanted to really hammer home the idea is for the folks that missed out on the rally that started in March, 2009. Almost every month, every quarter we saw headlines "Oh, is this market overheated? Is it going to turn back? Is it going to turn back?" And guess what, it really never did. A lot of stocks, the NASDAQ climbed higher, set record highs recently. We're higher than ever on a lot of those. And if you sat on the sidelines waiting for this whole thing to melt down, you missed out on the buying opportunity, really of a lifetime, the bull market of a lifetime.

So the Dow 100k theory is almost a doubling down of that idea. So in 2009, the Dow hit 7,000. And we'll just call it 30,000 recently, 28,000. So from 7,000 to 28,000, that's really no different than 28,000 to 100,000. And I think it's going to come quicker and faster because of the idea on this chart. This is money supply. So, I've talked about this. If you read Manward Digest, I've written about this. This is just a huge thing to understand is that, so the black line here of course, is the S&P 500, and then the green line is money supply.

Let me define money supply. So money supply is basically any money that's either cash or money in an account that you can write a check. That's M2, money supply. So if you have a savings account, checking account, or a money market account that you can write a check out of, that's this. Liquid cash. And this supply of that money over the last decade, over the last 15 years really, has just gone through the roof. That's because we have a fractional banking system, fractional reserve system. So if I put $100 into the bank, the bank can then turn around, leverage that up, and I don't know the exact number today, but let's just say they can take that $100 and make $700 worth of loans out of it. And so as they do that, that's creating new money. That's creating more of money supplies making M2 go up.

So you have that on one hand, and the other way of increasing money supplies, which you've probably heard about recently, is the Fed just printing money off its press and send it into our mailboxes, or buying bonds, mortgages, all that. That's what we see here on the right side of the chart, is that that fed money printing. And so over the last 12 years, money supplies just continue to creep up, but we know now that that curve is going to get a whole lot steeper. We saw it in April and May, and it's just going to keep getting steeper. The Fed is all about inflation right now. They're all about printing money. And so again, that's the largest driver of stock gains over the last decade, and that continues, and it will continue. That's where that Dow 100k is going to come from, and it's going to happen much quicker. That forex market move is going to happen much quicker going into the future than it did over the last 12 years. So the bull market in the last 12 years was strong and fast historically, it's about to get stronger and even faster.

It's not necessarily good news. There's a lot of debt. There's a lot of market manipulation. And the Fed is printing money because the economy is not doing great. It's a zombie economy, but we have to overlook that. If we say, "Hey, this whole is going to melt down some day," that some day it could be 15 years from now. And you might look good in 15 years when you say, "I called this," but you're going to be broke. Inflation, your neighbor who is investing is going to have a whole lot more money. You got to be invested in the stock market. And really, there's not lots of alternative today. So that's why I'm really pounding the table on the Dow 100k idea and trying to get it out there as much as possible. Hopefully, it makes sense. If it doesn't, look up M2 money supply, just print this chart out, look at it often, because this is what tells the tale.

So, that's it. If you have more questions, more comments, here's the mail bag email address. I check it all day, every day. There's nothing that comes through that I don't read. I can't respond to everything, I can't give personalized advice, but I read everything for sure. And then if there's a question I get multiple times or I'm seeing a lot, then I can address it publicly via an email, an alert or a video like this. So, welcome aboard. Thank you to everybody joined us through the Super Trader rally, had a ton of fun with that. Hope you enjoyed it. Hope you had fun with it as well. Thanks for signing up and we'll keep doing it. Keep those emails flowing. Good investing and stay safe.