Results: an unfortunate miss
Big earnings week coming up. An even bigger one afterwards.
Quick summary:
New survey, for Q4 competition, is up & running - click here.
Last week there was a strong three-day sell-off from Wed to Fri
Typically, such weeks are our bread and butter. But last week, the BASON prediction said markets were going *up* by Friday. Portfolio losses were contained at 2%, but there is that feeling of missing what would have been an incredible week, had we gotten direction right.
This week earnings continue with four of the magnificent seven (GOOGL, MSFT, META, AMZN). It’s also a week where we get the PCE inflation report on Friday, and the Q3 GDP number on Thursday.
The week after is when we really need to pay close attention. To our paid subscribers and ORCA Fund investors, I will be signaling what to expect from Treasury’s quarterly refunding announcement on the 30th (further pain on the bond market or not?), and FOMC on the 1st. It will be a week that defines the final two months of 2023.
The Q4 competition is live, make sure you jump into the survey. Prizes are as last quarter, $5,000 distributed across the top 20 participants.
More movement on the leaderboard, expected after last week given the miss. However, some precision numbers are still impressive. Keep it up!
NOTE: For all those new to the whole thing, here is a video of Scott and myself guiding you through the survey, showing you all its features, and briefly explaining how the competition works.
Last week’s performance
The equity sell-off since Wednesday was impressive. Three days of going more or less straight down, almost in linear fashion. Usually, these are our best performing weeks. A strong trend, either up or down, for three days in a row? The BASON was made for that!
With one caveat; it needs to get the prediction right :)
On Wednesday we played longs and by early Thursday already got kicked out of our positions, limiting the weekly losses at 2%.
Our prediction accuracy remains 68% this year. This means that 30% of the time, we do get it wrong. It was just unfortunate that we got such a straight-moving week wrong. A correct prediction to the downside would have yielded close to double-digit returns for the portfolio. 130 points (3%) down in SPX, with 2 DTE puts? You do the math! Oh well, we book a loss and carry on.
Earnings & macro
The overall macro trend remains negative in October, despite decent earnings from last week (as we mentioned in our Saturday update). Earnings came better than expected for most firms that reported thus far, and this will probably continue this week as well. With Q3 GDP growth being estimated at 5%, it’s hard to see how earnings might disappoint.
Today after close we get MSFT, GOOGL, tomorrow after close it’s META, and on Thursday it’s AMZN. Along with other big firms like IBM, Intel, Exxon, Ford, UPS, Visa, Coca Cola, etc. A big week.
But in the macro regime, this might matter little. Short-term squeezes are always expected, but when the driver is the bond market, equities follow, they don’t lead.
Here’s how we think this will play out:
What’s happens next?
Given the importance of what lies ahead, here’s an overview of what you can expect from us (for our paid subscribers):
On Saturday, we’ll do another weekly review, and describe our positioning ahead of the upcoming week, in expectation of what the Treasury and the Fed could do.
Then next week, after the usual Tuesday heads-up, on Thursday I’ll do an overview of the Treasury and Fed decisions, and how this could impact markets going forward until the end of the year. Basically, will we have a Santa rally or not? Our positioning afterwards will be more aggressive to either side, so make sure not to miss it!
…join the $20,000 competition!
Join our survey competition to get an opportunity to participate in our quarterly ($5000) and annual (3% of our profits) prize distributions:
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.
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