Here Comes Q2 - Will It Be Bullish?
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Market On Open, Monday 30 March
by Alex King, CEO, Cestrian Capital Research, Inc.
Coming into month end - quarter end - we can expect to see some rebalancing by large asset managers as we move into Q2. With stocks down from their highs we can also expect some opportunistic accumulation in the most beaten-down names. Apple (AAPL) for instance found support at its 200-day moving average on Friday, and this will likely see some programmatic buying coming into the new quarter.
I think there is every reason to remain cautious on equities. The bull case will be simple when it arrives, and it will be a combination of (1) monetary and/or fiscal stimulus driving liquidity into the market and (2) some easing of the war in the Gulf. When that happens we’ll see a big up-day in US equity indices; there will be plenty of upside still to capture thereafter if the stimulus and oil keep flowing.
Until then I think one needs to be agile and risk-aware.
The Wall Of Worry vs. The Slope Of Hope
After stocks have fallen is a very tricky time for investors. Rapid reversals to the upside come along often and can generate wonderful gains even if they are simple countertrend rallies in overall bearish conditions. Not taking gains on such reversals only to see the gains evaporate on a further slide in stocks can be heartbreaking. Volatility of the kind we are all experiencing at present is emotionally, psychologically and potentially financially draining. I don’t care who you are, how long you have been doing this, or how good a position you are currently in, this kind of environment are difficult to manage.
Machine learning algorithms don’t get stressed, however. Our SignalFlow family of algos continue to perform very well whatever the weather. One that has now come into its own is the SignalFlow Long/Short Algo service.
Results as follows, all simple ETFs, no options, no leverage, no futures, nothing facncy:
- Live Trading Since 1 January 2025: +18% vs. SPY +10%
- Sharpe Ratio: 1.85 vs. 0.50 for SPY
- Sortino Ratio: 2.5 vs. 0.6 for SPY
The service could not be easier to use. At the close each day you receive a trade signal for your consideration. The signal tells you what the model thinks is the best positioning into the next trading day.
The model has three choices: long SPY, short SPY (you can use long SH instead if you prefer), or cash. It can take a full or a half position. For all of March the model has chosen to be half cash and half short SPY (again, you could use half cash and half long SH if you prefer). I am confident that the model will flip long if and when the market firms up.
You can learn more about SignalFlow AI Long/Short here.
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