Astute Strategist Blog
Through the first half of the week, it looked like we were going to yet again have the S&P 500 (SPX) fall short of closing the week above the big 2900 price level. Having started the week at the 2888 level, and hovering a few points higher and lower up and until this past Thursday, April 11th which is when I wrote to our Astute Insiders (subscribers) that price action is showing something interesting and though it was speculative, I was of the opinion that the SPX was bound to test, if not close above the 2900 level for the week ending Friday, April 12th. Having built a low risk, high reward trade if the SPX did indeed close above 2900, our trade risked $2,200 to yield a potential max profit of just over $7,500. When the opening bell rang on Friday, the opening print in the SPX was 2900.86 and in all honesty, I wanted to hold the trade till the close as price action gave me the conviction that we would indeed close above 2900, we closed Friday at 2907. Astute Insiders (subscribers) yielded returns on capital in excess of 250% (286% to be exact).
Now that we have closed above the elusive 2900 price level, where to? This market really is quite bullish. There were plenty of reasons or chances for support levels to not just be tested but breached, and yet buyers continue to take control. It really boils down to money flow, not just North America, but specifically Europe and Asia. Given the political turmoil from Brexit, international monies have nowhere else to go, so when the talking heads on CNBC and Bloomberg keep reiterating that we are bound for a crash and this is the start of a recession, yes there can very well be a decisive pullback that can make it looks like the bull has indeed been gutted and the bears are the new rulers, however I am reminded of the old saying “looks are deceiving”. Price action always tells the story and if a bear market or likes of a recession are in the cards, we will, of course, be watching for it but in the here and now, it is certainly not in this current deck. Watch for a closing at or above 2915, if that is solidified, testing the all-time highs (2940) would likely be next.
In closing, I wanted to touch on our most recent stock that Astute Insiders got long last month. On March 24th, 2019, I wrote about Disney (DIS) being the next stock we were going to buy, there were plenty of reasons as to why it was so attractive. The next day (March 24th was a Sunday) we bought shares at $108, fast forward to this week and on Friday DIS closed at $130. Earlier in the week, I was out with a few colleagues and had mentioned that buying Disney and shorting Netflix is a trade worth considering. On Friday, Disney was up +11% while Netflix saw a drop of over -5%. All in all, it was a great week, keep your eyes on the closing price levels and enjoy the weekend.