Latest / Felix Nikolas Prehn's Podcast / Last Time This Happened, Stock Market Collapsed 88% + Stock Market News 08 February 2024

Transcript

Last Time This Happened, Stock Market Collapsed 88% + Stock Market News 08 February 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: Well, good morning to you.
• 0:02
  Speaker 1: Let's kill the echo.
• 0:03
  Speaker 1: And it is an unusual day, it is an interesting day, it is a good day and a day where we need to also do some reflection on just exactly where the risk sits, because there is some risk here that we need to be aware of and we can do something about that and make money.
• 0:21
  Speaker 1: I will also be live trading for you guys already in the community in literally 30 minutes, 29 minutes in fact, by now.
• 0:28
  Speaker 1: So see you over there, cats behind me making a racket because it's cold.
• 0:32
  Speaker 1: Hence the scarf.
• 0:34
  Speaker 1: And let's get cracking, shall we?
• 0:36
  Speaker 1: Let's jump straight into it and, of course, not of course, but if you want to learn how to actually make money from your money, take it from an old banker, this one here.
• 0:45
  Speaker 1: Come and join me on Tuesday Live philxfrensorg slash webinar, and I'll put a little banner here somewhere where you can still see it.
• 0:55
  Speaker 1: So what am I talking about with the risk?
• 0:59
  Speaker 1: And first time in like forever, it's only one time in history we've actually had this setup.
• 1:05
  Speaker 1: Seriously, is it this?
• 1:07
  Speaker 1: We need to understand a little bit the back story to it.
• 1:12
  Speaker 1: You need to understand what the setup is, you need to understand where the like button is and smash it, otherwise nothing good will ever happen.
• 1:18
  Speaker 1: And right now we are in euphoria land, not massive, massive euphoria land, but we are nevertheless above the official Bank of America euphoria indicator, which means a little bit of warning, a little bit of warning sign, but that's not actually what I'm talking about.
• 1:37
  Speaker 1: This is not the first time that's happened.
• 1:38
  Speaker 1: Ever has the market made money when we're at levels like this?
• 1:44
  Speaker 1: Chaluda, what do you think?
• 1:45
  Speaker 1: Do you have your insight, cat insight?
• 1:48
  Speaker 1: You guys know everything, don't you?
• 1:49
  Speaker 1: I thought you knew everything, just know how to rule the world.
• 1:52
  Speaker 1: No, that's not it either, although typically when you get a market euphoria trigger, it's again Bank of Bank of America data.
• 2:05
  Speaker 1: Then usually the following three and six months, the market is broadly positive not always, but most of the time it is.
• 2:17
  Speaker 1: So the on average, it's gone up 4% in the six months after we trigger the euphoria trigger.
• 2:24
  Speaker 1: When it does go down, it goes down like 6% on average.
• 2:29
  Speaker 1: So about 80% of the time we make money in this setup.
• 2:32
  Speaker 1: So so far, so good.
• 2:33
  Speaker 1: Right?
• 2:33
  Speaker 1: You're thinking like buy stocks, hand over fist?
• 2:37
  Speaker 1: Okay, here's what the bears will say to you.
• 2:42
  Speaker 1: It's always important to understand both sides of the conversation.
• 2:45
  Speaker 1: Don't just put on the blinkers and go.
• 2:46
  Speaker 1: I will only look at good news.
• 2:48
  Speaker 1: That gets you into trouble.
• 2:49
  Speaker 1: Most of you will remember pre and post COVID and so on, and the NASDAQ has obviously rallied tremendously, all time high and all of that.
• 2:59
  Speaker 1: But the breadth what's the breadth?
• 3:02
  Speaker 1: It's sort of the width, if you will, of the rally.
• 3:06
  Speaker 1: Very few of the actual NASDAQ stocks have gone up.
• 3:14
  Speaker 1: Most of them haven't.
• 3:16
  Speaker 1: And that's kind of weird because normally in a real rally, in a sustainable rally, everything goes up because the world has become a more beautiful place today, but it only applies to very, very large tech companies.
• 3:30
  Speaker 1: So that's a little bit of a bummer.
• 3:33
  Speaker 1: And if you were to look at the S&P rather than through the rose tinted glasses that we're looking at, where the S&P is, an index right, 500 companies and they're weighted according to their size, their value, their market capitalization, if you value them at equal levels, which is what the Dow Jones does, which is a actually the Dow Jones values them, which is really really really stupid way.
• 3:58
  Speaker 1: On stock price, it's like, oh my God, everybody's explained to Mr Dow or Mr Jones how the market works, or they did all right regardless.
• 4:08
  Speaker 1: Then in that case the market actually hasn't gone up at all.
• 4:12
  Speaker 1: Since what?
• 4:14
  Speaker 1: December it's just been flat.
• 4:18
  Speaker 1: So it's only been the large companies that have gone up.
• 4:22
  Speaker 1: The small ones, the medium ones, haven't done a thing.
• 4:25
  Speaker 1: And then you look at oh my God, there is an options trader on YouTube.
• 4:29
  Speaker 1: They shouldn't be allowed.
• 4:30
  Speaker 1: I understand it.
• 4:31
  Speaker 1: But sometimes it obviously seems a little complicated, needlessly complicated.
• 4:35
  Speaker 1: I try to explain it, and maybe by explaining it many times if it'll eventually become a needlessly simple.
• 4:42
  Speaker 1: There is something called the put skew.
• 4:46
  Speaker 1: Let's just look at it as call put ratio.
• 4:50
  Speaker 1: Essentially it's a little bit more complex than that, but typically it's the blue line here.
• 4:55
  Speaker 1: When it peaks, what happens when it peaks?
• 4:58
  Speaker 1: You following me, you're with me so far.
• 5:01
  Speaker 1: The red line is the S&P.
• 5:03
  Speaker 1: It typically means the S&P even the S&P pleads to decline and usually at these levels that's what happens.
• 5:14
  Speaker 1: We're kind of at that level right now.
• 5:16
  Speaker 1: So you're kind of thinking, okay, we're really overboard, we're really overexcited, and that means what it means the market budget collapse.
• 5:28
  Speaker 1: Not quite, not quite yet.
• 5:30
  Speaker 1: So give it a little bit of time here.
• 5:32
  Speaker 1: Let's move past that one.
• 5:36
  Speaker 1: That one's not really all that useful.
• 5:39
  Speaker 1: Usually when you hit an all-time high on the S&P, where we're at right, the S&P 5000, this is what we're looking at right now New, all-time high.
• 5:47
  Speaker 1: What happens in the week, month, three months, six months, 12 months?
• 5:51
  Speaker 1: You normally get a 13% return in the following 12 months Not too far off the average return of the S&P, but still it's not bad.
• 6:01
  Speaker 1: So you're going to go up.
• 6:04
  Speaker 1: You would expect another 10% 12% here before something hits the fan.
• 6:08
  Speaker 1: But the real crux comes back to the lack of breadth.
• 6:14
  Speaker 1: It's so few companies that are going up.
• 6:16
  Speaker 1: The majority of companies are below their moving averages and I'll show you a clearer chart in a second.
• 6:23
  Speaker 1: And what does that mean?
• 6:26
  Speaker 1: It just means that a lot of companies are going down and a couple are going up, and the couple who are going up are very, very large the Mac 4 or the Mac 6, tesla is on the naughty step at present.
• 6:39
  Speaker 1: When you see that and then you look at data this chap here puts it very nicely when we have this rare setup where basically fewer than 70 percent of stocks are above their 200 day moving average line, less than 60 percent above their 50 day moving average line, so most of the markets going down and a couple of stocks are going up, literally.
• 7:05
  Speaker 1: The last time that happened was August 8, 1929, and I remember that.
• 7:11
  Speaker 1: That's how old I am.
• 7:12
  Speaker 1: Somebody, please put in the comments you look far too young for that kind of a joke, felix.
• 7:18
  Speaker 1: Thank you very much.
• 7:19
  Speaker 1: What has happened there?
• 7:22
  Speaker 1: This is the Dow Jones Index.
• 7:25
  Speaker 1: There wasn't an S&P in 1928.
• 7:27
  Speaker 1: The 8th of August was here.
• 7:32
  Speaker 1: That was the 8th of August 1929.
• 7:37
  Speaker 1: I remember it distinctly.
• 7:38
  Speaker 1: What happened afterwards?
• 7:41
  Speaker 1: Well, there was a little bit of a decline in the market.
• 7:44
  Speaker 1: There was an 88 percent decline in the market.
• 7:49
  Speaker 1: Now I'm not saying the world is going to collapse tomorrow.
• 7:52
  Speaker 1: I'm not saying all this craziness is going to happen, but it just shows, to show that the only data point we could find in like a 100 years of stock market history is almost a 100 years ago, 95 years ago or something like that, which means we're in a very, very, very unusual setup.
• 8:13
  Speaker 1: That's something to consider.
• 8:14
  Speaker 1: Then you have to think about how do we make money out of that?
• 8:17
  Speaker 1: This is and you can look this up on TradingView there is a ticker called.
• 8:23
  Speaker 1: If you want to really have some fun, if you really want to impress your wife or your date, say type ticker S5F1 into tradingviewcom.
• 8:36
  Speaker 1: It'll show you the number of S&P 500 stocks above the 50-day moving average.
• 8:43
  Speaker 1: Now, if you are at that point, alone for the rest of the night, you only have yourself to blame.
• 8:51
  Speaker 1: Where we are right now is here.
• 8:58
  Speaker 1: What happens when the breadth of the market goes down?
• 9:01
  Speaker 1: Well, let me show you the S&P on the same chart.
• 9:06
  Speaker 1: In orange, I give you the S&P now 5,000, about to be 5,000.
• 9:14
  Speaker 1: In red and green, I give you the 50-day moving average line.
• 9:21
  Speaker 1: As this declines, typically the market folds together.
• 9:27
  Speaker 1: Now, right now, the breadth is falling, but the market is going up.
• 9:33
  Speaker 1: You end up with this slightly schizophrenic gap, as they say in the London Underground.
• 9:40
  Speaker 1: Mind the gap.
• 9:41
  Speaker 1: Not that I've been on public transport in about a decade, at least not in London.
• 9:46
  Speaker 1: I've seen it in the movies, though I do actually take public transport in Hong Kong.
• 9:54
  Speaker 1: Sometimes it's brilliant, cleanest, safest thing in the world.
• 9:57
  Speaker 1: That gap kind of needs to get filled.
• 10:01
  Speaker 1: Either more stocks start to go up or the market needs to calm the F down.
• 10:07
  Speaker 1: At the moment it doesn't look like that.
• 10:09
  Speaker 1: You are getting into a little bit of teeny, tiny bubble territory, but then there are good reasons for it.
• 10:15
  Speaker 1: Why are there good reasons for it?
• 10:17
  Speaker 1: Because there are things like this the buybacks are back.
• 10:23
  Speaker 1: The buybacks have been in a blackout period.
• 10:27
  Speaker 1: What happens all the time?
• 10:29
  Speaker 1: You get your months and in January, earning season kicks in, companies start to report their earnings and then around that you get, by law, a 90-day window blackout period where companies cannot buy their own stocks in this zone.
• 11:00
  Speaker 1: So we're coming out of that, but 40, 50% of companies are already out of it, which means these companies are now permitted to buy their own stocks again.
• 11:10
  Speaker 1: Which does what?
• 11:11
  Speaker 1: Well, it's bullish for stocks, right.
• 11:14
  Speaker 1: They're buying them back.
• 11:16
  Speaker 1: The stocks essentially disappear.
• 11:17
  Speaker 1: It's like money shredding and it's wonderful for the market.
• 11:20
  Speaker 1: They're buying.
• 11:21
  Speaker 1: They're buying back.
• 11:23
  Speaker 1: Cnn Fearing Greed Index is at greed.
• 11:27
  Speaker 1: Where do you buy?
• 11:30
  Speaker 1: At greed or do you buy at fear?
• 11:31
  Speaker 1: What is the rational thing to do?
• 11:33
  Speaker 1: Ask us out that question, please.
• 11:37
  Speaker 1: And then, of course, you have the jobs data out, just, and we were expecting 227,000 people to be unemployed.
• 11:48
  Speaker 1: We've got slightly less.
• 11:50
  Speaker 1: The continuing jobless claims.
• 11:52
  Speaker 1: We're expecting it to hit the 1.9 million mark.
• 11:55
  Speaker 1: You know what it's actually fallen.
• 11:58
  Speaker 1: The Biden Labor Department is working real overtime to make sure that the chosen one sorry, the commander in chief stays in power.
• 12:09
  Speaker 1: I imagine we've generated a few more McDonald's jobs, but at the moment, yeah, the beat isn't that great that the market's going to freak out.
• 12:18
  Speaker 1: Plus, the markets basically stopped believing jobs data from this government and pretty much any other government.
• 12:24
  Speaker 1: So therefore it isn't a huge deal, but it is again something to bear in mind.
• 12:29
  Speaker 1: Palantir has got a massive new deal.
• 12:32
  Speaker 1: We have no idea what it's worth, but Babco, if you didn't know, did a little bit of work for them and I was working in a loafer and they're a massive, massive burrini.
• 12:45
  Speaker 1: They are the burrini oil and gas company.
• 12:47
  Speaker 1: Basically, they're huge and Palantir is going to be running some upstream element of that.
• 12:53
  Speaker 1: You want oil and gas.
• 12:54
  Speaker 1: You know what that means.
• 12:55
  Speaker 1: Otherwise you're as clueless as me.
• 12:56
  Speaker 1: Come and join me live on Tuesday and I will teach you that's my promise to you my three rules for trading and you can apply them on your own after that hour long roughly session and you will be a smarter, wiser, better informed.
• 13:14
  Speaker 1: I'd even be entertaining, you know.
• 13:17
  Speaker 1: Go into Felix Rensseldorf's webinar, grab yourself a seat and sign up for that, and then let's have a look at the live market.
• 13:25
  Speaker 1: Pre-market a little bit mixed, a little undecided.
• 13:30
  Speaker 1: Abgo is up and video basically down It'll.
• 13:34
  Speaker 1: Apple is flat, microsoft Meta flat, google flat, Amazon flat, tesla app a little.
• 13:40
  Speaker 1: But it's basically a flatish morning.
• 13:42
  Speaker 1: It's not really a oh my God the world's about to end kind of a morning, so that's usually the calm before the storm.
• 13:49
  Speaker 1: Paypal also reporting earnings I've just put out a video on that.
• 13:54
  Speaker 1: Check it out if you haven't seen it already.
• 13:59
  Speaker 1: And the market loathed.
• 14:02
  Speaker 1: What they reported down 8%.
• 14:04
  Speaker 1: It was down 10% at one point pre-market, which is, I think, if you are expecting fireworks, you don't understand how slow it is to turn a company of that size around.
• 14:18
  Speaker 1: I mean, they have a market cap of 68 billion.
• 14:21
  Speaker 1: There was a lot of positive in it, but there wasn't a margin improvement.
• 14:26
  Speaker 1: That's what the market really wants to see and that'll probably that might take another four quarters.
• 14:31
  Speaker 1: That's basically what they're saying.
• 14:32
  Speaker 1: They're just not guiding to anything particularly positive.
• 14:34
  Speaker 1: So, the market not liking it, I'm going to set up a trade on that.
• 14:38
  Speaker 1: I'll show you guys on the live coaching call in a second, because I have an idea with this.
• 14:44
  Speaker 1: So there's always something we can do.
• 14:46
  Speaker 1: We did something a little bit similar yesterday, or I did rather on Uber, which also has worked out rather nicely.
• 14:52
  Speaker 1: I think sometimes you can smell when the market overly punishes the stock.
• 14:57
  Speaker 1: I think paper might fall into that category.