Results W8: Decent performance, but too much volatility
Despite a good prediction, the FOMC week proved too volatile for profit
Quick summary:
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Last week was even more volatile than the one before, and even though our predictions ended up quite good, it was difficult to make money trading them.
The PCE numbers are coming out this Friday. Also it’s the end of the month.
The 2023 Q1 competition is now open for its ninth and final week. That means next week we announce our winners for Q1 and the allocation of the first $5000 prize to the top 20 participants (first prize being $1000, second $700, third $500, etc. - read the rules within the survey).
Then, after announcing our winners next week and informing you about our Q1 performance, we will take a deliberate pause from the competition for just one week (it’s a shorter week anyway with markets being closed on Good Friday, April 7th) and reconvene again in the second week of April. So next week it’s gonna be all about the celebrations of our first batch of winners and an analysis of our performance.
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In terms of our leaderboard, a testament of how unpredictable markets were this first quarter, in our 8 weeks thus far, we have our 7th change at the top:
Good luck to everyone in the final week, make it count!
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Last week’s performance
The week before the previous one we were talking about a jumpy (kangaroo) market during which it was difficult to trade and make any profits, despite a decent prediction precision. Last week was more of the same.
Notice in particular the FOMC and post-FOMC reactions. The FOMC day was normal and expected volatility. Markets keep jumping up and down with respect to each sentence they hear from Powell. But by the end of it you tend to get a decent sense of direction. By Wednesday close, that direction was clearly down. Every time it finished like this on Wed, the decline continued on Thursday. Not last week though, at least not before first jumping up 1.5% during the day only to finish negative intraday and again jumping back up before the close. Friday was less volatile, opened gap down and continued to climb up to finish the day (and the week) positive.
To that end, our predictions were, at least compared to Wed close, spot on! But that’s not how they were traded, and such rapid market swings shot down any chance of making it a profitable week, for any position, really. During FOMC events we always wait for the end of the speech in order to position accordingly. But this time even that was hard to trade successfully.
So we’re having a week with decent precision (mostly within 2% of our targets), but due to high intraday volatility on Thursday, the condors couldn’t survive. Similar for direction really, especially if compared to Wed post-FOMC, which is when the positions were traded. They all did end up higher, but to little avail.
This week is the final week of March and the first quarter, so there is typically higher volatility on the last day. To add fuel to the fire, that same day we are getting the PCE (personal consumption expenditures) data, Fed’s preferred inflation gauge. There will also be housing market and consumer sentiment indicators published this week.
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