Results: Still waiting for that reversal
We took losses last week; were wrong on post-CPI direction
Quick summary:
New survey is up & running - click here.
The rally continued after CPI beat inflation expectations on Wed
We played for the opposite outcome, and lost, but with contained losses
Still up over 60% in 2022
Welcome back, dear subscribers. The competition is officially open for week 7 in Q3 2022. 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:
Thanks for participating, and keep having fun!
Last week’s accuracy & precision
Last week was a clear miss for the BASON; both direction was wrong, and precision blew past it’s C.I.s (2.9% for DJI, 3.6% for SPX). We only got the direction for 10YT correctly, but other than that it was a rather poor week in terms of performance.
The key issue? Misjudgment of the post-CPI reaction on Wednesday. As we acknowledged in our Thursday post, CPI beat expectations and printed lower than most investors expected, which is certainly good news, despite inflation still at a very high 8.5% annually. It is finally slowing down though, as its most important component - commodity prices (oil and gas) - are sliding (been going down since the end of June, btw). Naturally, this sent markets on another rally, once again in anticipation of the Fed not having to hike any further (or at least to stick to its priced-in schedule).
I don’t want to repeat any of the arguments made last week, but structurally we are still in a bear market, and still riding the rally.
When will it be over? Once again, you tell us :)
This week, FOMC minutes are released on Wednesday, and investors will be looking for signs that the Fed is committed to not raising rates more than what was already priced in.
Performance: losses endured but contained
We suffered a loss last week, but again contained at 30% of our exposure (and 2.5% of our entire portfolio). The key to having successful trading performance is not the upside, but how we deal with the downside. And so far, we are always able to contain them quite well. This way, all we need is one good week to wash away all the losses accumulated over the past month (each of which was small).
As mentioned last week, we opened the following positions (and were quite aware that we might suffer a bad week):
…this week we're trading 410/411 to 422/423 SPY 12/08 iron condor (10 contracts) for $440 immediate gain. We again bought separate legs of the condor - a bull put spread (410/411) and a bear call spread (422/423), and placed stop losses of 50% on each.
We are buying a put for downside protection, 1 SPY 423p 12/08 for $6.3. As it moves out of the money today it will most likely close at a $300 loss.
For DIA we are trading the following iron condor (again with separate legs): 325/326 to 334/335 DIA 12/08 (10 contracts) for $460 immediate gain.We are also buying 1 DIA 12/08 335p for $3.65. Same as above, moving OTM today means a small loss of $180 will be sustained.
As anticipated, the puts were closed at a $494 loss. The condors made money on the bull put legs ($209 in total), but lost on the bear call legs ($580 in total).
But we also had a VIX-related trade, if you recall:
…this week we’re jumping on the VIX bandwagon as we noticed good directional performance over time. We added 50 VXX shares (an ETF following the VIX), bought at $21.6 per share. That’s $1080 spent. The stop loss here is more conservative, if the VXX price drops to $20, the order is triggered and we accept an $80 loss.
The VXX closed Friday on $22.05, and we sold at a clear $22 per share, and hence made $20 on this trade. We need a better risk-reward scheme for this one :)
So the overall loss of the week was $847. Given that we risked about $2800, this is a loss contained at 30% of our overall exposure for the week.
A good thing is that this is only 2.5% of our entire portfolio, and given our upside potential, it will take one good week to erase all this and bring us back to where we were in early July.
Also, our overall performance is now at +236% return since we started this competition, and +60.6% in 2022. Still the best. And most importantly, not going down too much even when we’re wrong.
…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!