Astute Strategist Blog


Market Context

Good day,

On May 14th, 2019, I wrote to Astute Insiders, that so long as the Dow stays above 25,300 with added support at 25,200 we should see a sizeable bounce in the market and did we ever see it. The Dow took off to 25,950 and the S&P 500 went as high as 2891, which was a signal for us to short this market, on Friday the 17th, I wrote that this market does not look like it is going to hold, and gave the level of 25,890 in the Dow to keep an eye on, if the Dow closed below it, we would likely fall. Here we are two weeks later, at the end of May, and the Dow is has closed the week and month at 24,815 and the S&P 500 has closed 2752.

Hard to believe that earlier this week, the S&P 500 was trading at 2840. Three trading days and -88 points later here we are. President Trump, of course, helped the decline with his vow of tariffs and threat at NAFTA 2.0, and something tells me we have not seen the end of these tactics. Before the close today, Astute Insiders got updates highlighting which levels to watch for this market to signal that it is still weak. They were 2764 in the S&P 500 and 25,200 in the Dow, we closed below both, so now the question becomes, where are we going now? In all honesty, anything is possible given this market and the US Presidents twitter feed, but gun to head, I would have a stronger bias to the downside than up. Now that we have closed below these levels, I would not be surprised if we went to test 23,500 in the Dow or even as low as 23,000. To put that in perspective, that is between 1,300-1,800 points in the Dow and 130-200 points in the S&P 500.

This brings us to the topic of, where does the smart money get put to work? There are those who will tell you to use options and buy puts, while this protects downside it does little to take advantage of the very thing the market is experiencing which is volatility. A mentor of mine fondly called such suggestions as a great way to kiss your hard earned money goodbye. I prefer to utilize low-risk high reward strategies. For example earlier this week, I speculated that this market would trend lower and the Volatility Index (VIX) was already on the rise. Executing a trade that risked no more than $2,750 we had set ourselves up for a $10,000 payday, then the market went higher. Game over right? Not quite, as I watched price action, it looked like the market was indeed topping out and I saw an opportunity. We added a bit of risk to the initial trade and now our max risk was $4,950 if the market went above 2795. Before the closing bell today, we closed the entire trade for a profit of $4,300. Which gives a return on capital of 86.8% in just a week, now that is what I call a happy Friday! These are the trades and opportunities we execute on and distribute to you as an Insider.

Finally, I wanted to share with you some very exciting news! Many of you are aware of our Astute Insiders subscription being $279/month, NOT anymore! That’s right, we are offering our Astute Insiders subscription, which includes our online weekly class for just $99/month. That is less than a cup of coffee a day! Click subscribe and get the trades that put your hard earned money in the right places. You execute, you yield!

Risk & Reward

This was in the update that was sent out Thursday and Friday. “Our initial risk in the trade was $2,750 and we did increase it by $2,200 with this adjustment but there is a method to the madness. As illustrated below we now have limited risk should the market hover around here and in the event we see a dip, we have great profit potential.” and Friday, “It is now time to close this one out and having used $4,950 in margin on the trade, we are closing it out for a $4,000 profit that is an 81% return on capital. Happy Friday!”