Results: A rally for the bears
A small loss, a big rally, and the worst bearish sentiment yet
Quick summary:
New survey is up & running - click here.
Last week was peak bearish sentiment - almost everyone had a negative outlook
And yet, the market rallied to >4%, pushing us out of every position
Losses contained to -2.5%, still up 66% in 2022
Welcome back, dear subscribers. The Q3 competition is now open for week 11 (three more weeks left in Q3, before the winner is announced). The leaderboard is updated and available within the app. You know the game: get in, have your say on our 5 indicators and 2 stocks, take opportunity from our early info on price targets, and keep pushing for that $2000 prize!
Note: If you haven’t already, don’t forget to leave your email after you finish the prediction, so that we can send you early results on Wednesday - see the end of the post.
For all those new to the whole thing, watch this quick video guiding you through the survey, showing you all its features, and briefly explaining how the competition works:
Watch more on our YouTube channel. Thanks for participating, and keep having fun!
Last week’s accuracy & precision
Last week we saw one of the worst bearish sentiments yet in our survey. Almost everyone was suggesting a negative move, and naturally the BASON’s algo delivered the same conclusion - a continuation of the sell-off that started after Jackson Hole.
But instead what we got was yet another bear market rally, sending the S&P up by >4%. It killed all of our positions already on Thursday (the puts, which were rather cheep, reached their stop-losses immediately on Wednesday). We stated that we are ready in case the rally reverses itself by the end of Thursday, but it didn’t. We took the loss, limited, as always.
Performance was bad across the board except for the 10Y T-Bill yields, which were spot-on (bonds are still doing very poorly this year).
What was interesting last week was peak bearish sentiment, across the board, not just in our survey. Note for example the trading activity of institutional investors and how the negative sentiment peaked last week (they bought $8bn in put options last week, and only $1 in calls - scary):
This can sometimes be contrarian actually, as too many shorts can imply no more buyers left in the market, which triggers low-vol rallies. The fundamentals and the narrative are largely unchanged - not much has happened to alter the overall bearish view - and yet the markets rally. And rally hard. That’s just how it is during bear markets - a lot of variance.
The most important thing is to learn to live with it and stop your losses when you’re wrong. Which is exactly what we do every week.
Performance: fifth best week thus far.
As mentioned last week, we opened the following positions:
…this week we're trading 379/380 to 393/394 SPY 09/09 iron condor (10 contracts) for $540 immediate gain.
We are buying a put for downside protection, 1 SPY 393 put 09/09 for $3.90. The stop-loss was already triggered during yesterday’s rally, and we lost $198 here.
For DIA we are trading the following iron condor: 301/302 to 314/315 DIA 09/09 (10 contracts) for $450 immediate gain. We are also buying 1 DIA 09/09 314 put for $2.94. A stop-loss was also triggered here, and we lost $150.
Finally, the UVXY position, bought at $10.37 per share, is still alive, subject to a 10% stop-loss.
As mentioned, the puts reached their stop-losses early, losing $343. Luckily they were pretty cheap going into Wednesday. The condors got bought back the day after, losing a total of $440. The same for UVXY position, losing $103 on Thursday.
Altogether we ended the week with a $886 loss.
Our overall return is slightly lowered to +248% since we started this competition, and +66.5% in 2022.
The S&P is -13% in 2022, and -3% since we started the competition. Still no other benchmark (commodities, etc.) comes even close to BASON’s performance this year.
…join the competition!
Participate in our survey competition regularly to get our predictions on Wednesday and take opportunity from our early info on price targets.
NOTE: Remember, by participating in the competition and leaving your email in the user profile, you get our predictions before everyone else (on Wednesday after the markets open). Leaving your email is the only way for us to contact you. If you want it, ofc.
DISCLAIMER: This prediction survey is still in its testing phase. Neither the survey nor its results 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 bears no responsibility for your investment choices based on these predictions.
And, as always, don’t forget to subscribe to the newsletter!