Transcript
Robb Reinhold: Well, hello little Maverick Traders. Nice to see you. This is Robb Reinhold and I’m joined by Corey Halliday and Mr. Darren Fischer. I might give them a little bit of chance to talk, you know how I like to hog the microphone. I’m just kidding.
Robb Reinhold: Hey everybody, it’s always so much fun to meet after a year of trading because I remember my very first year of trading, I literally didn’t have more foresight than the end of the day, like my trading it all ended at the end of the day and whatever happened that day was the only thing that mattered. And then I started realizing as I had done it for a while that well I could have one day that was good, one day that was bad and really what mattered was how I did for the week.
Robb Reinhold: So I stopped thinking about the day, I started looking at the week, then I realized that, “Okay, well week is not a big deal.” I started looking at months and now it’s pretty interesting how you’ve been in the game for a while. You start looking at years and it’s really crazy than another year has come and gone, and it’s always a great idea as a trader, no matter how experienced you are or inexperienced you are to stop and look back, look back at your numbers, look back at your trades.
Robb Reinhold: There’s always room for improvement and there’s always room to be better. And so we always like to do this at Maverick, take a little bit of time to stop, take a look back at the year that was, go over some of the good moments, the bad moments, go over the market, what happened. And then the great thing about the markets and trading is that it doesn’t care what you did in 2018. That’s the crazy thing about trading is that there’s a lot of other professions where if you just worked long enough, you can kind of sit back and relax and let all your past work do the work for you.
Robb Reinhold: Not someone trading, the market does not care that you had a great year last year. It also doesn’t care that you had a bad year last year, it doesn’t care. The great thing is, what’s done is done, close the Europe, and then we’re going to look forward to 2019 and talk about what could possibly happen.
Robb Reinhold: So, I really liked doing these review sessions because it’s always great to look back, but I always really liked to make predictions as well. And the more you get to know me, you’ll find that I always have an opinion. I know I told my wife that all the time, she was asking me like, “Oh, do you like this at the store?” And I’m like, “No.” And she’s like, “Well why not?” I’m like, “I don’t know,” and I said, “Great. I was going to get it.” Now, I’m not. I’m like, “Look, just because I have an opinion doesn’t mean I care.”
Robb Reinhold: So I love to make predictions, but the great thing about being a trader is that you’re going to make predictions all the time this year, some of the predictions are going to be wrong, you just move on and you go onto the next one. All right, so let’s jump into it. Let’s look at our predictions from last year.
Robb Reinhold: Now, these predictions were pretty far out there. First prediction was that Oprah was going to announce the democratic bid for president. That hasn’t happened yet, you know, what? I think it’s going to be pretty interesting to see who announces their bid for president. Now, that President Trump has shown that really anyone, anyone can become president. It’s going to be interesting to see the people we have.
Robb Reinhold: All right. Again, these are all of fake ones, we always like to have a little bit of fun, make some fake predictions but let’s go onto the real ones. All right, so our prediction was that the market was going to have another good up year, and I actually went back and looked at last year’s year in review and I looked at kind of what we talked about going into 2018.
Robb Reinhold: I brought up the term that we were going to be building the bubble. A lot of people thought that we were further along the economic cycle and I said, “No, I think we’re just about to start to build the bubble.” When you build the bubble, really, it’s a story about inflation, it’s a story about everything getting more expensive.
Robb Reinhold: So that was my call last year that the market was going to do well and then inflation was going to take off, and that it was going to set us up for potential crash or bear market later in the year or in 2019. So I called for the markets to close up 12%. Well, I tell you what, if we would have closed the year in September, I would have looked like a genius, but that is not the case. The market took a real beating after September and actually closed the year down.
Robb Reinhold: I think the estimate goes down about 8%. So we did call for a big pull back late in the year and we definitely got that. We definitely got that in December, December was the worst month since 2008, since we’re in the financial crisis. So we had a big pullback in December, and we called for the international emerging market stocks to outperform the US.
Robb Reinhold: Well, that definitely did not happen, emerging market was extremely weak last year, especially when we compare it to the US. So we call it for higher commodities except oil and we said, oh, I was going to stay in the 50 to 60 range. You know what, you got a little bit outside of those ranges, you got up close to 70 and they got down close to 40, but for the most part oil state in that range, our call was for gold to go higher because of this inflation story that when you build this bubble, everything goes up in price, everything goes up in value.
Robb Reinhold: Go close the year right under $1200. So we did not see the movement goal, but we expected. We thought the FOMC was going to raise interest rates three times, they actually raised it four times, they had a hike in December that we didn’t call for. Now, we call for the Cryptos, your cryptocurrencies to fall too much lower levels, that absolutely happened.
Robb Reinhold: And for any of you who have not been around in the market all that much, whenever we use the term a bubble, a bubble is basically when an asset becomes totally detached from reality as far as valuations goes. Cryptocurrencies was an absolute bubble and if you want to go back and study it, study the craze, going into it, the pop of the bubble and then the subsequent crash of the bubble.
Robb Reinhold: It’s right there, it’s very recent history. So we call it for the bubble of cryptocurrencies to have popped and that things were going to go lower, and that’s exactly what happened. Cryptocurrency, some of them went down 70%, 80%, 90% this year alone. And we called for the US dollar to weaken.
Robb Reinhold: Well, that did not happen. The dollar was actually the second strongest currency outside of the end and it actually performed really well this year, which was one of the reasons why your emerging markets did so poorly. When we take a look at our predictions, I’m going to go ahead and give it a B minus that some things were pretty good and some things not so much.
Robb Reinhold: So the story of last year to me was really about the return of volatility, and we got the first sign of volatility, we got in January and February and it really came after the first January jobs report showed much higher than expected wage growth. The market started to get freaked out and we saw a huge tumble, and this was the month that really killed anyone who is trading volatility.
Robb Reinhold: Now, that had been one of the most popular trades in Wall Street over the last two to three years was to sell in short volatility. And there’s something in Maverick, we always warn people about that selling volatility you’re getting a couple of nickels and dimes when you’re right, but when you’re wrong, you get slaughtered.
Robb Reinhold: There were some real serious moves in volatility products, and one of them was in the TVIX, which is the Triple Volatility ETF. The thing went down 91%, it just got crushed. I’m going to bring Corey in on this because to me whenever I have a question on volatility, I always go to Corey. Corey, do you want to just talk a little bit about what you saw happen with a volatility products that short volatility trade?
Corey Halliday: Yeah, volatility was really an interesting trade this year, we did a recent class talking about those ultra-short ETFs and some of the volatility products and some of the flaws that are in them. If you’re not aware of that, if you’re trading VXX or UVXY or any of those and you’re not aware of the construction of them with futures and so on, I would definitely point you to that class where we talked about some of their flaws.
Corey Halliday: But what’s kind of interesting about volatility in these spikes is that although those are deteriorating assets, it can actually flip the other way where they can go up more because the future is get what we call backwardated, and it’s backwards to normal and that can actually work against somebody betting against those products and so on. So you had a lot of that. I mean, if there was ever a year where those were really in focus, it was last year, and so January, February we saw a massive downturn in the markets and those ETFs or ETNs where they’re exchange traded notes, they’re based on futures contracts. Some of them absolutely blew apart.
Corey Halliday: It was interesting Vanguard just came out and announced that they are outlying all of those volatility products on their platform. So they’re no longer going to allow any trader, any investor to use any of those VXX, UVXY. Now, some people argue, “Well, that’s very parental, let people decide for themselves.” Vanguard has basically made a statement that they think people are just going to get in trouble with those and just to leave them alone and basically outlawed them.
Corey Halliday: So you’re gonna have your differences of opinion but it really was the year of those products seeing all sorts of kinds of explosions and things that were outside of the norm.
Corey Halliday: I know a lot of traders because those had experienced years and years of decay and especially 2017, if you go back 2017, I think the largest stock market decline for the entire year with something like three point something percent. If there was ever a year where the socks just kept going higher and never really had any pullbacks, never really had any spikes in volatility it was 2017.
Corey Halliday: So traders were kind of looking at that and saying, “Wow, this is great, we can just bet against these flawed volatility products and we’ll make a ton of money. But you have to understand the risks and you have to understand that that decay that happens can actually flip and work against you.” And now all of a sudden you’re in an asset that has even more risk to it than you had imagined and expected.
Corey Halliday: So I wouldn’t say that we fit in line with vanguard, we don’t outlaw them at Maverick, but we’re certainly very, very cautious of them. For me personally, if I trade any of those volatility products it would be with a very small amount, it would be with a lot of caution and understanding that there’s a lot of risk in them.
Corey Halliday: So where there’s risks, there is some reward potential but be very careful with those products. 2018 kind of shows you what can happen and I think it’s a precursor. If you think 2018 was the outlier, it’s not really that way, actually 2017 is the outlier, having no volatility is abnormal. Having some big volatility spikes like we saw in 2018, that’s normal behavior and I suspect 2019 and 2020 and 2021, they’re more likely to behave like 2018, not like 2017. That would be my argument and I think that’s what history suggests.
Robb Reinhold: Here’s I said, I always go to Corey when I have questions anything about volatility. Last year, the US did much better than the rest of the world. We’re going to take a look at some charts, but the US was one of the best markets out there. Now, the big stories this year to me were the Tariffs, so what President Trump put steel and aluminum Tariffs on a lot of other countries, and really he started the Tariffs to talk in wars with China in the summer. And I’ve got to say, I’ve had a lot of people ask me, “Robb, why is the market going down now? The economy is still good. What is it?”
Robb Reinhold: When I say, “Look, I’m not doing and I’m not being political here, but if you want to take a look at what has really rattled the markets the most, it hasn’t been the Fed, it hasn’t been the government shut down. It’s been the trade war with China and the trade war with China that is potentially going to put the Chinese economy into recession.
Robb Reinhold: We just got China PMI a couple of weeks ago and for the first time in years the PMI was below 50, which means that their manufacturing unit is in decline and manufacturing is a leading indicator. China is the world’s second largest economy goes into recession, then there’s no way that we don’t feel any pain from that.
Robb Reinhold: Again, we saw the big sell off in December, but here was the ironies that the economy continued to grow and again I kept seeing all these people on CBC, all these analysts, all these mutual fund managers saying, “Oh, don’t worry about it, don’t worry about this decline in the market. The economy’s still doing well.” Well you know what, in all of their models that they went to school again to be a financial analyst, you’ve got to go to school and you learn that the stock market is a predictive measure and is actually predicting a slowdown. And typically the stock market shows a slow down about six months in advance.
Robb Reinhold: I’m not here to cry doom and gloom here, but there’s no question that there is a potential problem and potential recession coming up regardless of what the people say on TV. So we do have the economy continued to do well, unemployment’s very low. GDP was up 3.1% this year, but right at the end of the year, the market started to freak out, looking forward saying, “Hey, it doesn’t look so good.”
Robb Reinhold: So here are the 2018 market returns, you can see the US did much better, S&P down eight and a half percent, NASDAQ down almost three and a half. Take a look at Europe and Japan, just got crushed. Gold was basically about flat for the year and oil got creamed as well.
Robb Reinhold: Now, this doesn’t really tell the whole story. So you look at yearly returns and to me, I looked at these and I said, “You know what, there’s more to the story, there’s more to this story than just this.” And so really what I wanted to do was I wanted to break down the market from January to September and then from October to December.
Robb Reinhold: So January through September, we had the volatility in January and February, but then we really went up from about March all the way through September. So if we were to stop and take a snapshot of the market, you can see the S&P was having a decent year of almost 8%, the NASDAQ was up almost 14%, the Russ up 9%. Look at oil, oil was up 22% as of September. Gold was down almost 10% and treasury yields were up.
Robb Reinhold: To me, this year was January through September was a bull market, and most of your good trades were likely on the bullish side and that’s where you want it to be. And then there was a change in October. Now, everyone remember the sell in May and go away kind of talk, one of the things we always talk about are these seasonality patterns and these things that people talk about. And the problem is, is that when you look at these seasonality patterns, it doesn’t mean it happens every year. Yes, there is a statistical relevance that it may happen more so than not but you just bet on it, and this is a year that the whole idea of sell in May and go away and come back in October where you got creamed. You missed all the good stuff and then you bought in on all the bad stuff.
Robb Reinhold: So October to December was really nasty and you could see everything just changed. S&P, NASDAQ, Russell went down, oil turned around, gold went up, and treasury yields went down. So to me this was really a year of two different markets, nine months of bullishness and the three months of bearishness.
Robb Reinhold: So let’s take a look at the internals in the market, take a look at the sectors, and our best sector was healthcare. We talked about the health care sector a lot in the summer, we became very bullish on healthcare and healthcare had a fantastic run all the way to about October.
Robb Reinhold: When it did pull back, it did not pull back as deep as the others. Utilities where our second big best sector this year, consumer was the third, and in this consumer is a lot of consumer nondiscretionary. So if you take a look at these three sectors, healthcare, utilities, consumer, these are genuinely considered safe, stable investments, and people like to buy these when they have fears of growth.
Robb Reinhold: Again, safe, big, stable companies with predictable cash flows that typically pay a dividend. Well, we just exactly named at what those receptors are all about. What did the worst materials, industrials and finance. Now, if you think about this, this is a lot of international. There’s a lot of international wrapped up into here.
Robb Reinhold: Materials, when you take a look at materials company, mining, chemicals, oil, there is a lot of multi-national stuff and when the rest of the world slows, that’s going to get hit, industrials. Again, big industrial companies like Caterpillar Boeing. Again, when the rest of the world is weak, we see some weakness out of these.
Robb Reinhold: So what I wanted to go through, I really wanted to show everybody that this year was really the story of the US and I really want to point out, so here’s the US from January to September. And we talked about this period of time. We said, “Hey, this was a pretty much a bullish market here until October when it broke apart and became a bear market,” take a look that we actually had a pretty decent move to the upside.
Robb Reinhold: Now, let’s compare it with Europe, let’s see what Europe did during that January to September period. Look at Europe, Europe was actually flat to slightly down, so the whole time the US market was moving higher, Europe wasn’t going anywhere. When we take a look at emerging markets, you can see that emerging markets were never even in a bull market or a sideways market.
Robb Reinhold: Emerging market is pretty much went down all year. Now, here’s the interesting thing. Look at emerging markets over the last two months. So the rest of the Europe, the US, they’ve all tumbled quite a bit over the last few months. Look at emerging markets, they stayed in there pretty well. So we really like the way that this look and I know that both Corey and I have been playing some Brazilian stocks. There’s some other markets that actually looked pretty good going forward. But I really wanted to point out …
Corey Halliday: I was just going to chime in while you’re on emerging markets, I was looking at a graphic that showed every segment of the market, I mean frontier markets, emerging markets, developed international and I believe if I remember it correctly, there were two markets that were positive for the year, last year, only two out of all of them and it was India and Brazil.
Corey Halliday: So those are both emerging markets, excuse me, and both of them kind of had their advanced late in the year even as markets were crumbling here in the US. So there was a big rotation, these emerging markets you can see it’s stable. It was kind of pulled down a little bit where it didn’t show more upside here because it still had some weaker components as well.
Corey Halliday: China remains weak and so on. But I thought it was interesting because when they talk about emerging markets, a lot of times people will refer to the BRIC, the B-R-I-C, the Brazil, Russia, India, China. And two of those, Brazil and India were the only two positive markets for the entire year. And they weren’t positive by much granted, but slightly positive for 2018. So a little outperformance there towards the end for sure.
Robb Reinhold: And I actually think that this is the year where we’re going to start to see some international stuff do a little bit better, especially if we see the dollar continue to pull back like we have the first two weeks of December. All right. So again, let’s go ahead and look at 2018 was taken, we looked at the markets. Let’s take a look at Maverick Trading, let’s take a look at some of the changes and some of the additions here.
Robb Reinhold: The first thing I want to announce, we send out a press release in September, send out a press release that Darren Fischer has become the new CEO of Maverick Trading. And I have been the CEO of Maverick Trading for well, forever. And really what this change was all about, was that as the firm has grown and as we’ve got into some other areas, I started to find that I was doing a lot of day to day operations and I was being pulled away from the things I love to do, which is I love to trade, I love to work with our traders, I love to help our traders become profitable.
Robb Reinhold: I was finding myself bogged down a little bit with just the day to day operations. Darren Fischer, he became one of our traders in 2010, and then we asked him to do some marketing for us and then he became one of our recruiters. And when I was looking around I said, “Who better is there out there than Darren?” He knows the firm, he knows trading, he knows everything, and I’m so happy that he was able to move out here, moved his family here and really take some stuff off my hands.
Robb Reinhold: So we kind of had an effective date of January 1st where he was going to basically take over, and what we said is we wanted to make this transition where no one really noticed and that was the key. So let me quickly introduce Darren Fischer and have him say a couple words.
Darren Fischer: Thanks, Robb, especially thanks for the opportunity. Like Robb said, I’ve been here for nine years and there’s really no other place I’d rather be. We’ve got a great group of traders, we’ve got great staff. And one of the things we pulled all the staff together when we now say this internally and brought everyone together. And we took a look, we’re doing everything we can for our traders because you were the future of the firm.
Darren Fischer: We took a look and said, how can we make the experience better? So there’s some internal stuff that we did and like Robb said, it’s really smoothed things out on our side, we hope it’s been transparent to you guys, but we have some things that we’re introducing here in a little bit later that I think everyone’s going to be really happy with.
Darren Fischer: I do want to say thank you to everyone who’s watching, all of our traders out there. One thing that I realized I didn’t get to see before, before I came here to Salt Lake, I see a much broader picture now. One thing I noticed is that, all of our traders are very good at risk management. I know it’s one thing that we really stress, but I’ve really been impressed with the per position risk, the portfolio risk management that each of our traders has done.
Darren Fischer: By and large, our traders did very well in Q4 and we’re very happy with them. So, on behalf of the firm, thank you very much. I also do want to thank our support staff. We want to be there for our traders whenever they need support. There’s a lot that goes into that, there’s a lot of behind the scenes work when you send a question. A lot of times, there’s a lot of research that goes into that as well. So I also want to say thank you for, to our support staff and to keep doing what they’re doing.
Darren Fischer: A couple of things that we wanted to take a look at. In 2018, we had a lot of traders come and ask, “Hey, I’d like to trade both options and FX,” And we never really had a codified structure for that in place. But what we’ve been finding is that the traders, once you master one division and then go trade in the other division, we find that they’re even more well-rounded.
Darren Fischer: So if that something that you were thinking about doing, by all means, if you want to reach out to any support staff, you can reach out to your original recruiter as well. We’ll be happy to give you information about it. You can decide if this is something you want to do, if you want to become a little more well-rounded.
Darren Fischer: The other thing we noticed is that some of the best traders we’ve gotten have been referrals from existing traders. It’s just natural. I mean, you like what you’re doing and you know someone that you like as well and hey, this could be beneficial to them as well. You want to trade with them, you want to trade with someone that you know, and that we find that helps out a lot as well because you two you know each other, you can trade.
Darren Fischer: Again, never really had a codified process of how we treat trader referrals. So if you do find someone that you want to trade with and you think they would benefit from being at Maverick and maybe it would be benefit to you and them as well. We’ll suspend your desk fees for three months if they decided to come on board. I allocate myself about 60 seconds here and I think I’ve definitely blown past that. So thank you very much. I look forward to 2019 seeing what it brings and I’ll pass this back onto Robb.
Robb Reinhold: Actually, again, it’s great to have him here. And the great thing about Darren is, I’ve always said the best and worst thing about Maverick is that we’re all traders. What I mean by that is that everyone you talk to is in the market with you, the problem is traders as just a broad measure, we’re not great at paperwork, we’re not great at detail and that fits me perfectly. But that does not fit Darren. Darren is fantastic at detail, he is fantastic at getting things done. So he’s going to do a much better job than me.
Robb Reinhold: Again, like I said, my whole plan here is to get back into being more side by side with our traders. And let’s take a look back at the actual trades that we made last year through our trade alerts. And we actually made quite a few, I think the year before we had about 250 closed trades. This year we had 313, we had an okay win-win loss ratio 57 to 43, but I’m really happy about our reward to risk ratio. Our private ratio, so again, a buck 73 on average for every winner against all the loser. That’s a good measure right there.
Robb Reinhold: So overall it was a good solid year, it was very good when you take a look at the numbers. The most common strategies this year, we’re actually at the butterfly and the diagonal call, which that would kind of surprise me. Yes, we did have a market that in the middle part of the year wasn’t very volatile and things like a butterfly and diagonal call spread works very well in those markets. But it kind of surprised me that those were the most common traits because I know that on my list of trades I make, those are fairly uncommon.
Robb Reinhold: Our best raised this year were Netflix and Roku, worst trade was on CRC California Resources, and again the only reason why something was ever the worst trade is because we have very strict position management, position sizing rules, and if something ever had some slippage. So where you had to stop on something you had slippage, that’s the only way something could be the worst trait because all of our trades have the same risk management to it. And that’s what happened on this one, it had a little bit of slippage and ended up being a little bit worse of a loss than we expected.
Robb Reinhold: All right, well let’s take a look at some of these trades. So the best trade of the year was one of my favorite traits, I absolutely love the call ratio backspread. It’s one of our strategies that we show all of our traders, not many of them have ever seen it before and when they say it, they say, “Holy cow, that is the coolest strategy in the world,” and you know what it is … But I always say this, when I show our traders the strategy.
Robb Reinhold: When I first learned this strategy, I thought to myself, I found it, I found the holy grail of trading. This is all I ever need to do. When I tried it, it worked and worked and worked and I thought to myself, I did it, I did it. Now look, I’ve thought that I found the holy grail to trading about five or six times, but what people don’t understand is the market changes. Going back to what Corey said, you know, people thought they found the holy grail of trading in 2017 when they sold volatility.
Robb Reinhold: Oh my gosh, I saw that strategy out there on every single website tastytrade’s loved it, TD Ameritrade loved it, everybody loved it, everybody loved the short volatility trade. But what happens is market change, and that’s what happen. This call ratio backspread, this fall was a very fantastic time to bring it out, and this trade was, you went long three times the number of calls you went short. So it’s creating this ratio, we have three to one long calls to short calls. So it is a bullish strategy if you look at a risk graph, it looks like this.
Robb Reinhold: And you really couldn’t script this one any better, so we put the trade on down here around 340. And when Netflix announced earnings, it opened up here at about 380. Well, we sold the excess calls immediately. So remember we have a 3:1 ratio, so we sold two of the calls for a pretty good profit. So we bought them at 850, sold them at 1985.
Robb Reinhold: Now, that left us with a one by one 365 by 325 bear call spread. A bear call spread if you take a look at this risk graph, it looks like this. What happened is, so we sold the excess calls when it was up here, we converted into a bear call spread and what happened is the stock tanked and it tanked all the way down below 325 and we were able to close that position up for trade. Now look, that doesn’t happen all the time and if you expect that to happen all the time you are going to be very disappointed.
Robb Reinhold: But every so often it works out fantastically, so we made some money on the upside and then we turned around and made some money on the downside. It was a very, very big gain for our traders. So it’s fantastic to see a lot of them jumped on board with this. The other nice one we made was a Roku. We saw Roku have a nice little jump. Now again, on this chart there’s doesn’t look too substantial, but this is a 10% move in about three days.
Robb Reinhold: We were loaded up on long calls, pretty levered on this one. So it turned out to be a very, very nice chair. You can see really nice high-end type base here. Roku ended up going significantly higher on that until of course October when everything fell out of bed.
Robb Reinhold: So again, it was a good year for trading. We saw a lot of good volatility. The thing I loved about this year was that this year you could make both long and short trades, but bullish and bearish trades and you could make money on both. If you went back to 2017, the market just went up and as Corey mentioned it hardly ever pull back.
Robb Reinhold: So if you were making bear trades as long ultra is what we do at Maverick with our basket trading method, it was a drag on performance. This we had clear, clear trends in sectors and it’s fantastic. So next year, we are going to always look to improve, and the thing that I know that I’m going to be focusing on this year is more interconnectivity. I want to make the communication even deeper with our traders, with our instructors, with our staff with management.
Robb Reinhold: We’ve done a lot with the forum, we’ve done a lot with the chat, we’ve got a lot with CRM integration to where we can now know very quickly where everybody is in the process. Again, it’s technology, we’re always trying to keep up with technology to try to make the experience even better for our traders.
Robb Reinhold: This year, we are Maverick Trading Summit, we have this every single year. This is where our traders come in from out of town. Last year, we did New York and we’ve been doing this summit since 2009. And I’ve got to say, we always have a fantastic time at the summit, it is so fun to get together in person with our traders. But I’ve got to say that the one that we had in New York last year, I don’t want to say it was the best, but it was the best. It was fantastic, I mean just everything was fantastic, we were right there in Times Square, we had a great group, we went out at night and had a great time.
Robb Reinhold: So this year we’re going back to Vegas and it’s going to be May 10th, 10th and 11th. So May 10th and 11th, put that on your calendar, we’ll be getting you out all the information on it about how to get signed up for it and any more information you need. But put that on your calendars, we’re always excited for it. We love our summits, it is so much fun to finally get in touch because again, trading is a lonely game and it’s always great to surround yourself.
Robb Reinhold: When people come out to the summits, they meet other traders and they form groups and when they go home they’ve got a much deeper bench of people that they can talk to and interact with. We highly recommend, if you haven’t been to a summit before, love to see you there in Vegas. If you have been to a summit before we already know you’ll come back. We already know because it is really, really fun.
Robb Reinhold: So again, I just wanted to get the dates out there for everyone to put it on their calendar. As Darren mentioned, look, we’re always looking for more great traders. If you have people you know and again sit them down, show them your trading account, show them what you’re doing. Anyone who you think is going to be great, just go ahead and let us know.
Robb Reinhold: So let’s go ahead and close the door on 2018. Again, 2018 I thought was a great trading year, I gotta be honest, I enjoyed it way more than 2017, and 2018 was much more profitable for me. And the reason why was because as I said, as traders, we want markets to move and we want trends to go somewhere. In 2017, all we had was this uptrend with no volatility. So for a trader who wants to get in and out, in and out and be long and short, it wasn’t the best markets.
Robb Reinhold: This year was awesome, we had really strong trends. I mean things like the home builders, they were like the worst all year, you just had to be short. We’re bearish them all year long and they were a great trade. Energy was a great trade, we went long in April and then we went short in October. It was just a really great trend this year.
Robb Reinhold: So we have to say goodbye to that year, but let’s go ahead and look forward to 2019. All right, so this is where I love to give predictions. Like I say, I’m going to give these predictions and then I basically forget about them, because as a trader we just want to react to price action, that’s it. So all these predictions are really just for my enjoyment, my entertainment, but it’s going to kind of set the stage for what I’m looking for this year.
Robb Reinhold: So I think that the equity markets are going to be trading sideways for most of the year. However, I do think we see a stronger second half of the year than the first half of the year. If you take a look at what is going on this year, we’ve got Brexit that is literally happening next week. Next week the vote goes to the House of Commons again. It’s likely to get rejected again, the hard deadline is March 29th. So March 29th, if they don’t have an agreement in effect, there’s going to be what’s called a hard Brexit, which means that there’s going to be no agreements between the anything the UK does.
Robb Reinhold: So that means anyone who wants to travel to Europe, they might have some trouble traveling. Anyone who wants to ship a package from the UK to Europe, they may not be able to do it, anyone who wants to do business with the Euro zone, it’s going to be highly disruptive if they have a hard Brexit.
Robb Reinhold: Now, we think that the same thing that happened in the US back in 2008 is likely to happen in the UK, and what I mean by that is remember when everything was on the brink of the destruction in 2008, banks were closing and they went to Congress and said, “Hey, we have a bailout packaged to save these banks.” And remember the first time we went to Congress, they voted it down and the market’s freaked out, they freaked out, they panicked and then all of a sudden everyone said, “Oh crap. Maybe we should actually support that.”
Robb Reinhold: Probably the same thing happens with the Brexit. There’s probably going to get rejected, there’s probably gonna be a nasty reaction to it, and then they’ll probably come in the end and make an agreement. But all that does is lead to a lot of volatility and uncertainty and they could potentially do a lot of damage to their own economy in the UK to where they may go into recession because of it.
Robb Reinhold: So again, I see the first part of this year, also with the China tariffs, right now they’re in agreements to hopefully make some trade deals with China if that doesn’t go well. Again, there’s just a lot of things in the first quarter of the year that could definitely cause a market some stress.
Robb Reinhold: So what we see is I think growth is going to slow, but I don’t think we see recession in the US or Canada. I mean, China does go into a recession, but I think it’s pretty shallow and I think they come out of it fairly quickly. Which kind of supports why I think the second half of the year is going to be better. Because of this, I think there’s going to be very little central bank activity this year and I’m not just talking about the US, I’m talking about around the world, I don’t think we’re going to see any central bank hiking this year.
Robb Reinhold: The market expects two rate hikes, I think we get one rate hike and I think we get it in December of next year. So I think the fed is pretty much completely out of the picture especially if the market stays weak. So again, we’ll probably see Eurozone growth slow. And this is the one that I think is going to really catch on is deflation. So I talked about inflation at the beginning of last year, I thought it was going to get a little bit worse than it did, it didn’t. I think you’re going to start to hear about deflation.
Robb Reinhold: When you hear about deflation, you’re going to start here central banks, may start talking about cutting rates in other countries. I think we’re going to see oil stick between 40 to 60 gold, I think trades is a little bit lower because of deflation. And I think some cryptos are going to go to zero, I think the crypto bubble is officially popped in over. So probably not going to see much more.
Robb Reinhold: All right. Hey Corey, let me turn it over to you real quick. What are some of your things you’re looking for this year?
Corey Halliday: Yeah, thanks Robb. On the stock and option side, I actually expect some of the similar things to you at international markets, which if you go back and look at this for years and years and this is always a thing where you got to be a little bit cautious about playing the laggard, but I think it’s not the laggard anymore. I think some of these emerging markets and international markets are actually going to outperform the US. It’s been multiple, multiple years where the S&P has outperformed those other markets and probably for good reason, but this is a little bit different shift. In the US, the reason that growth, so I think growth is still stable and we’re not going into a recession, I agree on those points but we do have tough comparisons.
Corey Halliday: So when you’re looking at the fundamentals, we’re comparing this year’s numbers to last year numbers and they’re gonna say, “How did we do in the first quarter of 2019 compared to how did this company do in the first quarter of 2018?” The problem is, if you look at last year, we just had a big corporate tax cut and there were some real benefits that were front-loaded for these corporations in those tax cuts. So it inflated earnings, it inflated their balance sheet, it gave them more capital to work with it. It kind of fueled where their earnings looked really, really strong.
Corey Halliday: That’s part of coming out of that big announcement for the corporate tax cut, you’ll recall January just blasted higher in 2018. And we just sky rocketed and then we came crashing back down to earth. Well, 2019 is going to be the year of comparisons. We’re entering into earning season here and it’s going to continue kind of throughout the year where I think they’re going to do these comparisons and it’s gonna look pretty tough. Whereas in the emerging markets and in the international markets, I think they’re already working off of such a low comparison and such a low base that there’s just a little outperformance opportunity.
Corey Halliday: For me, it is kind of a strange thing, we don’t focus on international stocks a lot, but you’ve probably noticed for our traders, I mean we’re trading some Brazil products and I think that’s going to be a theme this year, where I’m going to be trading some of those ETFs that are international, Japan, who knows? Russia, India, whatever it may be. I might trade some country ETFs, I might trade some individual stocks where you can trade their ADR as American Depository Receipts, that you can trade Toyota Motors or whatever. And their ADRs are traded on the New York Stock Exchange.
Corey Halliday: They still have plenty of liquidity and so on. So I think that’s going to be a theme this year. That’s my area of focus from a trading perspective on the upside is I think there’s better outperformance opportunities in some of those international equities than here in the US. So I agree with that point and that would be an area of focus for me. Hope that’s helpful.
Robb Reinhold: Yes, Corey. You know the great thing about how we trade it back is that we trade the charts and so look, the only reason that I’m even, that we’re even talking about emerging market stocks is that when we run scans and we’re looking for specific stocks that are doing this, this and this on a chart. When we’re looking for bullish setups we’re not starting out, let’s go check out Apple, let’s go check … No, we say, give me a list of all stocks of this criteria. And what we’re seeing is over the last couple of weeks we’re seeing a lot of foreign companies pop up in those bullish scans.
Robb Reinhold: And that’s the great thing about how we trade is it, you don’t need to know about international, you don’t need to know about all this stuff. What you need to know is you need to know how to read a chart, how to run your scans, and then had to go through those. If the emerging markets are more bullish, guess what? They’re going to show up in your scans and you’re going to end up trading them anyway. That’s just such a beautiful thing about trading off at yours.
Robb Reinhold: All right, speaking of chart. So here we are, present day, the S&P 500. We talked about this move quite a bit, so we were looking in all of December saying, “Hey, we need to see a capitulation move. A capitulation move is where you have a huge move to the downside with a big spike in the desk, and we got that, we got that and we got a big spike at 35 and we said, “Hey, that was the bottom,” and now we’re saying, “Okay, we’re most likely going to trade up to this resistance point right around this 26, 25 and that’s going to be the first test of this bear market.”
Robb Reinhold: That’s where we’re looking at here, I do think we stopped at that area, I think we spend most of the first couple months of the year in the range between the bottom and this 26, 25. And if you take a look at last year, take a look at, we bottomed out in the very first part of February last year, we had a big bounce back just like we’re seeing today. We went back and retested that low in March, we held that low and then it took about another month or two for a new uptrend to start.
Robb Reinhold: I think we’re basically going to be seeing the same thing, I think we’re going to be trading between 2350 on the S&P, 26, 25 at the high, but I do think we will probably work out of that area in the next four to five months. Corey, what do you see on the SPX here?
Corey Halliday: Yeah, great point on the kind of the exhaustion low there. My touched on this in the market roundup this week where the temptation after a big kind of flush out on the downside is you’ve seen so much bearishness in the market that it has a tendency, and the same thing happens on the bullish side, but you have a tendency to put too much emphasis and too much weight on what recently happened. It’s recency bias, right? So we kind of get lolled into this sense of like the market beat us into submission and now we’re bearish on everything and we think as human beings, we think all everything’s about to crash and the world’s coming to an end and the economy’s going in the crapper and so on and so forth.
Corey Halliday: And all of a sudden we get really negative on everything. And so as you start to see prices bounce up, the temptation is to get way bearish because you’ve been that recency bias. Hey, everything’s terrible. Well, this must be a gift and a shorting opportunity and the market gets kind of, when you go through that exhaustion phase, it’s exhausted for a reason.
Corey Halliday: I suspect this kind of recovery and whatnot may play some tricks on people where, maybe that line that’s kind of the line in the sand. I wonder if the market goes just a little above that first and then starts to drop. So, do we go back and test some lower prices? I don’t know if we’ll take out the lows in December, but do we go back at some point and kind of check back and trade back down for a couple of weeks? I think the answer is yes, but I almost expect that the market’s gonna inflict pain on the upside first here, just very short term.
Corey Halliday: And then maybe we check back for a few weeks and so on. So I’ve learned from experience, I guess, that you have to be a little bit aware of your emotions and the way that the markets making you feel about them. And a lot of times I make this comment that you have to do what makes you feel uncomfortable. And I wonder if the uncomfortable thing here is buying the market still for just a little bit more upside, just a little bit more of a recovery, and then it probably drops back down.
Corey Halliday: So, in this sick, twisted way that the market works, I think that key level and I wonder if we just don’t spike our head above it and then drop back down. But basically, ultimately I think this is a rally that will fade off and we’ll probably spike above 2,600 something and then come back into the low 2500s maybe even high 2400s February, March, that time period.
Corey Halliday: I would just be careful in the future about kind of how these bear market downward to client’s work and then the big steep recoveries. It’s worth noting that the largest rallies and history and these big recovery rallies, like you saw that huge bullish candle down there that was like a 5% or 6% update in the markets. Those don’t happen when everything’s calm and the market’s just kind of gliding upward in a nice uptrend.
Corey Halliday: Those happen when you just feel 18% in a short time period, then you get a 5% update. It’s more kind of indicative of a bearish trend, but it’s also indicative of we’re exhausted on the downside. Anyone that was willing to sell has sold into that sell off. So now we have a little bit of a day in the sun, a little bit of a recovery. I think it may play a little trick here where it may be is a little bit stronger than people expect, and then declines right back down and kind of shake some people out again on the downside. So that’s where I would be looking and that’s kind of the way I think this might play out here in the short term.
Robb Reinhold: Corey, and as you were talking, I realized that I was talking to a trader just two or three days ago and I said the same thing. I said, “I bet we spike above 26, 20 for a day or two, just are really screw over anyone who was trying to be short and then we come back down, that’s too funny. So look, you know they say great minds think alike or it might be the crazy people think alike as well. So I guess we’ll find out which one it is.
Robb Reinhold: So yeah, I totally agree with everything, everything you said here. All right, so let’s go ahead and kind of wrap up what we see happening the year ahead. Again, I see flat markets through most of the first part of the year, I think we do see some good gains the second part of the year, and I think international emerging stocks will outperform the US and again, I think the commodity stay fairly muted here.
Robb Reinhold: I’m a gold and oil both stay a little bit muted. And I see the Fed raising once in December. And then again we have US dollar continues to weaken if that happens, that weakening dollar is really positive for emerging market stocks. So again, if that happens and that emerging market call will be pretty accurate I think. All right, well let’s talk about things to remember.
Robb Reinhold: All right, be consistent. As you saw that during that year, we sent out a total of 313 traders. So again, you’re going to make a certain number of trades this year, it might be 100, it might be 200, it might be 500, it might be 12, who knows. But in that group, do you see how there wasn’t really one trade that mattered? Oh yes, we had a nice gain on Netflix and we had a bigger than expected loss in CRC, but out of those 313 trades, not one trade mattered.
Robb Reinhold: The only thing that mattered were that the numbers, the win loss and the profit factor were positive. That’s what makes a winning trader. And I know in all of our summits, we always talk about your numbers. As a trader, you’ve got to know your numbers, you’ve got to know your win loss. You’ve got to know your profit factor, because if you don’t know those, that means you’re not focusing on those. And one of the things we always say in Maverick’s trade for percentage returns do not trade for money. If I could, I would go into all of your systems and completely erase the P&L window.
Robb Reinhold: I would love to where you could never see what your P&L was on any of your trades. Now imagine that, imagine that you had no idea whether you are up $100 down, $100 up, $1,000 down, $2,000. You had no idea what the P&L actually was and you had to make your trade just based off the chart. If you couldn’t see that P&L, do you think you’d trade better? Most of you probably would, and that just shows you that you really need to focus on that consistency.
Robb Reinhold: We have no idea what our trades are going to do, we do our research, we read our charts so we do everything we can to put the odds in our favor, but in the end, some of the best setups lead to the worst trades. So our goal is to cut losers, control and manage risk on all positions and generate positive returns not because we’re smart, not because we got lucky, but because we did it right on every single trade.
Robb Reinhold: So again, that is the whole focus in trading and that’s really our mantra at Maverick which is just be consistent. Whatever you do, do it every single time. Just make sure you’re focusing on making good trades. If you’re focusing on the money, the money is kind of hard to get from the market.
Robb Reinhold: If you focus on making good trades the money is simply a byproduct of it. So again, focus on that consistency, be consistent. So again, congrats to everyone on their 2018 returns, I just got all of our 1099s and I’ve got a big stack sitting in front of me, I’m going to be mailing those out to our traders here this week. So of course we just did our tax prep class. Do you have any questions on your taxes? Go to that class and then send questions to us if you have them. This year because we’re not going to get A. I don’t think we’re going to get a big push on the market any direction. I think we’re mostly flat for most of the year.
Robb Reinhold: That means that it comes all down to sector in the industry group, you’ve got to find the strong sectors to be bullishing, just like Corey and I talked about with emerging markets. Right now, Brazil is good. Why? Who knows? Who Cares? How long is it gonna last? No idea, but as long as it’s good, we’re going to ride those on the bullish side.
Robb Reinhold: Right now, there’s things that are really out of favor. I mean, Macy’s just a pre-announced earnings, they tumbled 18% all of retails on their heels right now. So again, focus on the sectors industry groups. Make your trades in those groups and you’re going to be just fine. As always, proper position sizing, proper risk management, never take the catastrophic loss.
Robb Reinhold: Corey, do you have any final words for our traders for 2019? I say final words, but we talked to our genders literally daily. But do you have any words of wisdom for them?
Corey Halliday: Yeah, I mean I think you hit the key points, we always emphasize that proper position sizing and just really risk management. It’s amazing to be in a spot like Robb and I are in where we can see such a variety of different traders, and we literally have traders that trade exact almost, it seems like exact opposite ways and they can still be profitable and it’s kind of awe inspiring that way.
Corey Halliday: But then when you break it down, it kind of comes back to, it’s the system, it’s building a system that works for you, for your personality and you’ve got to trust in it and you’ve got to believe in it. I’m such a better trader when I have confidence in myself, when I’m confident about my decision making, even when I’m wrong, I’m confident that I can get out of a trade that I’m wrong about and not worry about it. I don’t have to sit and watch it for days and see and grade myself every day thereafter.
Corey Halliday: I know that sometimes I’m going to get out and it wasn’t the perfect exit point and you’re not going to get those perfect exit points, but over time you can make money at it. And so, I would just emphasize that point that really focus on good position sizing, good risk management, because that, if nothing else, that is really, I think where the money’s made. And so you can have different approaches to the charts. You can have different favorite technical setups and whatnot. But if you manage risk well, where your risk and reward, I mean the most, the best thing that I saw about our trades in last year was that profit versus loss, right? That risk versus reward.
Corey Halliday: If I’m wrong about a trade, I want to make it as painless as possible, and that means trying to take a smaller loss as possible in the trades that I’m getting wrong. And in the trades that I’m getting right, I want to maximize that profitability as much as I can. That’s something that I constantly try to work on and improve upon no matter how long you’re trading, you’re going to try to continue to work on and improve upon that, but really focus on it as a point of emphasis here in 2019.
Corey Halliday: So have a great year everyone and we enjoy it, we love you and if you ever have anything that we can help you with, don’t hesitate to ask.
Robb Reinhold: And again, happy trading everyone and we will be around for anything you need. Thank you very much. See you later. Bye.
