Results: still high precision, low accuracy
5/6 fell within 2% confidence intervals
Quick summary:
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Last week’s performance was similar to the week before: a miss in direction, but very high precision on almost every indicator compensated for the directional miss
Also, the VIX directional play and the macro hedges did well
This week we have the Fed minutes on Wed, and the PCE inflation index on Fri
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Last week’s performance
It was a week very similar to the one before. Good start on Wednesday, getting us very close to our target levels before the close (see table below), a gap down on Thursday, followed by a nice intraday rebound in our direction (again getting us close to our targets), only to finish with a hard sell-off in the final hour before close, which carried on till Friday open. The 4050 was the key SPX target last week as the options expiry on Friday was testing this lower boundary (watch this to see what I mean by that). It didn’t manage to pierce through, even though it touched it on several occasions during the day. In the final hours, the price went back up within our 2% confidence interval.
For us this meant another week where we missed direction, but had really good precision on almost every one of our indicators.
5 out of 6 came within the 2% confidence intervals we typically assign. Most importantly, the VIX prediction was both correct in direction and precision, allowing a decent return on this particular position.
The VIX prediction was a good signal coming into a major options expiry week, so it made sense to expect higher volatility towards Friday, which is what happened. In hindsight, this higher volatility was primarily a result of the sell-offs, so we couldn’t have been right both ways. No big gains, but no losses either.
This week we start with the release of Fed minutes from the last meeting on Wednesday afternoon, and then on Friday the Personal Consumption Expenditures (PCE) price index is released. This is the most closely watched indicator by the Fed, so do expect more volatility towards the end of the week.
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