Potential Short Term Bounce But Further Risk After
|Elazar Model Portfolio Performance|
Before I go into my thoughts on markets I wanted to cover our recent results.
The chart above were the results of our model portfolio since inception. We were up last month while the market was down.
You see that we missed the wild swings of the market. We are also averaging under 20% net market exposure.
If someone had 20% of the market exposure they should perform 1/5 as well. We are keeping pace with the market having less risk on the sheets.
We are also doing that with well under 100% invested. We're normally closer to 50% invested.
If you take the two numbers together and see we are keeping pace with the market without the big drawdowns, you can understand that our picks, sizing and timing are valuable alpha generators.
Subscribers have used my picks, sizing and timing to fit their own trading styles.
We were able to catch this big down move. I think we were ready for it given our call outs of a Fed taper in concert with hedge funds over-levered plus health concerns (here).
The Stock Market
I think we're nearing a short term bounce. With the one case in the US of death I think there's a risk for a down open Monday. That said the Fed's promise on Friday at 2:30 to support markets and a badly beaten-up market there's a better chance for a squeeze bounce.
Bounces are riskier. To me catching direction is more intuitive but bounces are just as important to respect.
Medium term I think the reduction in repo support is an accident waiting to happen. I pointed out recently that the Fed was in 'taper' mode. That helped pull some support from markets as we saw this week. I've been following this closely.
Many were happy to ignore the health risks because of Fed support. But that Fed support of the repo market was shrinking. So investors didn't have the backstop.
We first got short on Monday morning in our model portfolio.
I mentioned last Sunday publicly that if we sliced through the 331 SPY key support then there's "likely further follow through." Along the way I pointed out that a slice through 320 would bring us to 300. I also said a break of 303 and 'look out below.'
While I expect a shorter term bounce the number of new cases globally accelerated in recent days.
That needs to slow down otherwise governments and economies are going to shut down.
That's a dual problem for markets when thinking about over-leveraged hedge funds that will need to liquidate if the Fed is no longer supporting them come mid-April.
If you heard Bill Gates he had more concern where this can be headed.
Morgan Stanley Conference This Week
We'll be focusing on the Morgan Stanley Tech conference starting tomorrow. I'm guessing we'll get negative preannouncements as companies prepare to speak. Some companies we're following at the conference are: INTC, MSFT, TWLO, NFLX, NVDA, GOOGL, CYBR, LRCX and many more.
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