Q2 overview

ORCA was up 5.4%, YTD 18.6%

First, some housekeeping.

Congrats to the Q2 competition winners! We will do a formal announcement of all winners on Tuesday, and by next week you will be receiving your congratulatory emails and payment schedules.

Having said that, there will be NO SURVEY next week. Markets are closed on Thursday (4th of July), and are open only until 1'pm on Wednesday. There is really little point in us being present only for trading on Friday, especially since we expect volume to be low, so we will not run the survey, nor will we be trading next week. Enjoy the break!

Market environment in Q2

What did the market environment look like in Q2? As we’ve been saying it for the past two months: sideways-up.

It started with a clear correction in April, with a series of sell-offs for the first three weeks, and then a very sideways bounce in the last two weeks.

Then came the FOMC on May 1st, and we started a gradual grind up for the rest of the month, and then again consolidating and moving in the opposite direction sometime after May OPEX.

June was just more of the same; we got strong moves up into all-time highs, typically driven by good macro data (good meaning anticipating Fed cuts), and then a period of consolidation that lasted from a few days to a full week and a half, before the next move up. We ended the month yesterday with some strong selling flows, just after reaching yet another all-time high, at 5,520 for SPX (primarily a consequence of a good PCE inflation report, but the market fell over 1% since its intraday high). This final trading day alone was emblematic of how the rest of the quarter looked like.

In hindsight, it’s easy to say that a simple buy and hold strategy would have been sufficient during this entire period, but with spikes in volatility, and sell-offs every now and then, I doubt that many buy-and-hold investors would have held through the red days (for those that did - kudos, you have the right mindset for this :)

Overall, after the April correction, we are again grinding up, the market has certainly found trend support, however, it’s trending up weaker than in Q1. Notice the gap from Jan-Mar trend (continued since Nov last year) and the May-June trend:

Equities clearly bounced from their correction, and are pushing into all-time highs, but they’re not growing as strongly as during Q4 ‘23 and Q1 ‘24. In other words, if we really wanna see that same bullish strength, we need to close that 6.5% gap taking us to 5,800 or more. This is what the bulls 🐂 are looking at as their next target coming into the summer and election season.

The bears 🐻 see all this as a sign of weakness, and are setting their targets at 4,800 (a 12% decline). A decent asymmetric trade there.

However, as we said last time, expect more of the same rather than a strong bull or a strong bear. Still no major regime change, still data dependent, and Fed dependent.

What about volatility?

After spikes in April, it got pinned down during both May and June, with a few spikes during the consolidation days. But even yesterday, with the intraday sell-off, the VIX was up only 1.6% on the day, closing at 12.44. Volatility is therefore still pinned, as expected during the sideways-up regime. We could see a gradual increase in volatility coming into election season, but it’s looking more like markets up, volume up, rather than a sign of a major sell-off coming up.

Obviously, this is all about probabilities, so there’s always a probability of both a strong bull or a strong bear. But in our view - unlikely. Enjoy the summer!

ORCA BASON Fund performance

After two flat months, June finally came through for us. We didn’t get a single big move up (3%+), but we managed to stay positive for all 4 weeks, gradually moving up (just like the markets, lol).

The final trading day really made the month (and the quarter), as we banged 2% during the initial push up in the first hour. During sideways regimes, taking profits is necessary (unlike more directional regimes, where holding positions ‘till the end is a better strategy), so we raised our stops and got taken out as markets started the intraday slide down.

In terms of performance, ORCA BASON Fund is up 5.4% in Q2 2024, and 18.6% year-to-date in 2024.

Since inception (Feb 2023), we are up 41%.

(NOTE: all numbers are gross, i.e. without performance and management fees)

These are now very decent numbers, achieved over almost a year and a half, testifying to the strength of our strategy.

What about as compared to the benchmarks?

We kept outperforming all except NASDAQ. European and Chinese equities were going down, as were commodities and gold. Global equities and US bonds had marginal gains, so the biggest movers were really S&P and NASDAQ, driven primarily by tech stocks.

As for the YTD performance, we are still above all others in terms of gross returns. There is a 4 point gap against the SPX, and just barely over NASDAQ (although after fees, NASDAQ is still better). All other assets are continuing to underperform our strategy this year.

Here’s to an even better Q3!

Thanks for reading!

DISCLAIMER: Neither the survey nor any of the contents of this website can act as investment advice of any kind. The results of the survey need not correspond to actual market preferences or trends, so they should be interpreted with caution. Oraclum Capital, LLC (Henceforth ORCA) is a management company responsible for running the ORCA BASON Fund, LP, and for organizing a survey competition each week, where it invites the subscribers to its newsletter (this website) to participate in an ongoing prediction competition. The information presented on this website and through the survey competition should under no circumstances be used to solicit any investment advice, nor is it allowed to be of commercial use to any of its readers. The survey and this website contain no information that a user may use as financial or investment advice. All rights reserved. Oraclum Capital LLC.