Astute Strategist Blog


Market Context

Good day to you all,

New highs and clear skies even with the headlines reading the waging of World War III. Earlier this week the futures market overnight was seeing a Y-UGE drop on the horizon for the markets set to open the following day. The catalyst, of course, was the retaliation of Iran to the US in having fired missiles, a few hours after the news first hit there were reports that none of the retaliatory missiles hit anything but open space, this caused the overnight futures market to do a complete 180 turn and we were again headed higher. The reversal continued for a day or two which takes us to Thursday close. Prior to the close Thursday, I was growing weary and very tempted to short the market. As the opening bell was set to ring Friday morning futures again were pointing higher and as soon as we opened, I got short. As the day wore on it appeared that I was early in shorting and again we would witness a record close.

Fast forward to about 1:15 pm EST and off went the risk. It was as though most wanted to be in cash over the weekend, and truthfully it seems to be the best position when heading into the unknown. It will be interesting to see how the week ahead plays out. The fact that we got selling into the close leads me to be less bullish, as far as the very immediate future is concerned. There is a saying that as goes January so goes the year, and the level of greed in this market is monstrous. On Bloomberg earlier this past week, it was said: “It almost doesn’t matter if there is selling in the market because we will see buying and a reversal of it in 30 minutes or and another hour.” Even the talking heads on CNBC and those alike leave me to be on the lookout for a surprise move to the downside.

All things considered, it all comes down to price action and as far as price action is considered, for right now buying the dips is still the way to go. Even if we get the surprise move lower this month, I would view it as a buying opportunity. The bulls may stumble or trip but we would look to buying that dip.

On January 4th, 2019 I gave my 2019 prediction for the year saying “My 2019 prediction for the market is that we go much higher than where we opened to begin of the year but nowhere close to a straight line. We are bound for lots of volatility” this was when the Dow and S&P 500 at their highs were at 23,500 and 2540 respectively. This year on January 4th, 2020, taking the lows to be even more conservative the Dow sat at 28,500 and the S&P at 3222. That is an increase of +26.8% in the S&P and the Dow +21.2% That is a blockbuster year for sure and while the sentiment of the market at the time of this post is bullish, my 2020 prediction is for the year to be lackluster (average) with a side of volatility. As I have previously mentioned, for the long term I remain very bullish and if Trump wins the election that very well could be the start of added upside.

Keep your eyes open as this market may have a few surprises in store for us. Through 2019 you have read me mentioning Apple stock (AAPL), and know how bullish I was. This time last year AAPL was trading at $152 and closed this past week at $310, which is a performance over +100%. There are always smart places to put your money and the numbers always tell the story, follow them and it will be found.