Results W1 Q2: still jumpy, but moving up
Decent week, hard to nail direction, but profits were secured
Quick summary:
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Markets keep being jumpy, however we found a way to work around it
Last week it was difficult to nail direction, but we kept a profitable week regardless (up by less than 2%)
This week is earnings week, with the VIX below 17, at its lowest point since the start of the 2022 bear market. Does it mean anything?
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Once again it was an up&down week, and we again noticed changes in the leaderboard with our Q1 top performers dropping down on the list. Is it temporary? We’ll see :)
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Last week’s performance
After a gradual grind up during Monday and Tuesday, Wednesday was CPI day. Our brief analysis last week on post-CPI performance suggested several possible outcomes, amidst obvious higher expected volatility:
“…a better than expected report could send markets up for the rest of the week, particularly in light with the short term bullish trends that we tend to observe right now.”
Well, the read was better than expected, although core CPI is likely to remain sticky for a bit longer. The initial reaction was a gap up move, but interestingly, the gap was closed within the next hour of trading, and, despite an intraday rebound, finished negative for the day (very similar to the December 13th CPI reaction). This was not the scenario with the highest likelihood, but then on Thursday the rally continued, and slowly built itself up for a 1.3% daily gain for SPX. Friday jumped up on the open, only to finish the day (slightly) negative.
Overall, the conclusion was right, a better than expected CPI report did send markets up for the rest of the week.
How was this traded then?
In the usual circumstances running our standard BASON trading strategies, it would have been another negative week. However, our new approach, better adapted to the current market environment, made sure we made a slight gain of under 2% despite missing out on direction and being caught up in swing moves from one day to the next. It was decent performance, especially given that during such weeks we most usually lose money.
This week is earnings week. We get the quarterly results of some of the biggest companies, including Tesla, Netflix, J&J, the banks (BofA, Goldman, Morgan Stanley, US Bancorp), AT&T, American Express, and many more. Last year this time around it was the bad earnings results that sent markets down on a 6-7 week downward spiral (when we made the bulk of our return for that year). All this is coupled with the VIX being down at its lowest levels since Jan 4th 2022, just before the bear market started.
Does that mean anything though? Not necessarily. A low VIX (typically in the 15 zone) does tend to signal a reversal soon, but a lot of that will be contingent upon the earnings results. If they are better then expected, the VIX could go down even further with the markets continuing their rally into the end of April and May. So just the opposite of last year.
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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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