Results: shorts ftw! (good time to cover)
6/6 predictions, up over 3% last week. Big week coming up.
Quick summary:
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Last week the predictions were almost perfect, both direction and precision, yielding us a 3% return for the week.
It was also about good macro positioning exploiting the downtrend, which has been the case since the end of July. Remember those hedges we recommended? Now is a good time to cover and take profits. Wait for the next cycle before reengaging.
Two big things we need to watch for this week: the highly anticipated Jackson Hole meeting on Friday, when we will hear from Powell on the next steps for the Fed. The second big thing will be NVDA earnings after close on Wednesday. Expect volatility.
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Last week’s performance
A classic down week where Monday was the weekly high, followed by several episodes of sell-offs during Tue, Wed, and Thu. Friday opened lower, but then reversed during the day to close the gap (most likely a bit oversold), albeit failing to push into positive.
It was not just equities, almost all asset classes went down last week: bonds, crypto, even gold. No place to hide. Well, apart from the short term tactical moves, like buying puts (remember how cheap they were in July?).
It was the kind of week we love, with a clear trend, very easy to take profits and capitalize on the predicted sell-off. Which we did:
The only miss for the BASON was the prediction for the 10year yield. Personally, it was the only one I thought we were gonna get wrong (given the broader macro conditions - will write about the bond market impact soon enough), but as always, we stick to the BASON.
Additionally, our macro positioning did quite well in August. With three weeks of declines, now is a good time to take some profits on those put positions. We covered the shorts, remain neutral on the macro side, and as always, listen to whatever the BASON says intraweek.
This week, serveral interesting events, but the biggest focus will be on two major ones. First on Wed, we get NVDA earnings where a strong reaction is likely. If it disappoints on any level, it will send its highly overvalued stock down by a wide margin. And the market along with it. If it delivers, however, we are in for a rally the next day.
But whatever happens after NVDA could be reversed or amplified by Friday when Powell speaks at Jackson Hole. This was the catalyst we kept warning about (although China is becoming a serious contender, more on this soon). It’s either going to abruptly end this bear cycle, or amplify it significantly. It most likely won’t be as hawkish as last year’s Jackson Hole event (after which markets went down 15% over the next month and a half), but we do expect it to be hawkish. Higher for longer, remember?
I’m not gonna share our probabilities on this one, cause I don’t want to bias your predictions :) Good luck!
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