Astute Strategist Blog

Market Context

Good Saturday to all,

Let’s take a step back for a moment, and consider the fact that this market finished a 150 point swing last week getting overly bullish and all economists looking brilliant as they go from saying “This economy is in a recession and we will continue to head lower” to “These are market cycles, we were bound to bounce and over the long term for those who are long term investors, the smart money, is staying the course”. It must be nice to love in a world where when you’re right you’re right and when you’re wrong you’re still right. For the rest of us who are held accountable, we will be the first to say that this past Monday, June 10th we really did think that we were heading lower, of course, there was the expected or anticipated bounce but after that, we really were ready to see volatility return. It did not and now here we stand 2.5% from all-time highs. Will we get there? Truth be told, anything can happen but we have mentioned in the past, the numbers always tell the story and the story they are telling for this week is that we are not ready for a breakout just yet. Weekly closes are what have our eye, and this week the S&P 500 did not close above or below the numbers that were on our radar. What were they? For the week, above 2910 and below 2873 to get a clear sense of direction, and we stayed right in the middle at 2886. For the longer term (monthly) we are looking for a closing above 2941 to say that the bulls are large and in charge.

In the meantime what are we doing? Well, interestingly enough gold finally woke up this week and made a decent move from a low of 1324 to a high today of 1360 only to lack of follow through to end the week. What caught our eye, is that we saw such a large amount of buying accompanied by a weak close and it was particularly the close that led us to trading gold with a bias to the downside. The number we were looking for was a close above 1360 for further upside and 1347 for a change in golds short bullish trend. Low and behold we closed at 1345 and Astute Insiders were given a trade using options in GLD (the gold ETF). The trade is 2 weeks out (June 28th) and uses a max risk of $4,800 for a profit potential of $6,500. Now, anticipating our readers’ responses, it is grand and wonderful if gold falls but what if it doesn’t, what if it stays right where it is? Here is the key to how we trade such opportunities. Should GLD hover or even go higher, we only risk $25 all the way up to 131, and as of Friday, June 14th, 2019 close, GLD is trading at 126.55. Think about that for a moment, mitigated risk, calculated odds and a sizeable profit in a downtrend. All for less than the price of a cup of coffee per day. We have included a risk graph screenshot of our GLD trade because as the saying goes, a picture is worth a thousand words. Novelist Ayn Rand said it best, “Money is only a tool, it will take you wherever you wish but will not replace you as the driver”. Click the “Become An Astute Insider” button below and get in the driver’s seat.

Risk & Reward

Below is the risk graph of our trade in GLD. We only have $25 of risk all the way up to 131