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Portfolio Holdings (Futures, Bonds, & Forex)

• Long Bitcoin - we added to a full 100 bps of risk now
• Long S&P 500 futures - 50 bps of risk
• Long Nasdaq futures - 50 bps of risk
• Long gold futures - 50 bps of risk
• Long WTI crude oil - 50 bps of risk
• Long Mexican peso - 50 bps of risk
• Long Swiss franc - 100 bps of risk
• Long euro - 100 bps of risk

Year-to-Date Performance

• Portfolio year-to-date returns: +10.46%
• S&P 500 year-to-date returns: +0.51%

Our portfolio has continued to outperform the S&P 500 with substantially less volatility. We are heavily positioned to the long side in equity indices, foreign currencies, Bitcoin, and gold.

In essence, our portfolio is short the US dollar. Of note, we did roll our Bitcoin futures position to the June contract.

Looking at the S&P 500 E-mini Futures compared to historical extremes during selloffs, the April spike low was as extreme as the 2022 bear market bottom, 2018 Christmas Crash, 2009 Global Financial Crisis bottom, and 9/11.

The oscillator on the bottom half of the chart is a new indicator I’ve built which measures the rate of change of the SQN indicator, which I use for market regimes and have talked about quite a bit over the years. You can learn more about the SQN here.

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I’m looking to see how fast we move from a given market regime to another, and, more importantly, I'm looking for extremes.

It’s that extreme in velocity that gives context to how significant of a bottom we’ve put in -- it is historically significant and gives me a lot of confidence to remain long, and even continue adding to the position.

Our focus will be on Nasdaq instead of the S&P 500. It had the same bottoming signal, but the Nasdaq has gotten back above the 0 line faster than S&P 500, showing better relative strength.

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Headlines-Based Decision Making

The entire market turmoil experienced recently was caused by the reaction to the headlines about tariffs.

I saw a tweet by Charlie Bilello on X this week about how investing (or not investing) based on political parties in the oval office has performed since 1953. Giving further evidence that reacting to headlines, as well as reacting to your personal feelings about a president, is simply not a successful way to do business.

I bring this up because I’m re-reading the 48 Laws of Power by Robert Greene. If you haven’t read this book, beware, it isn’t light reading material. In fact, the subjects are quite heavy, as it teaches how to manipulate people in an effort to gain power.

Think about it like it is an update to Machiavelli’s book The Prince, written in the year 1513, which was written for an audience of one, dedicated to Lorenzo di Medici, hoping to gain favor and a position in the Medici government.

What we learn in the 48 Laws of Power text, if nothing else, is that players at the highest levels of power would never have gotten to those positions without employing some of the techniques described.

In other words, by making decisions based on headlines, you are making decisions that are almost guaranteed to be susceptible to manipulation. Which is why we focus on systematic trading, using statistical advantages instead of trying to guess what’s really happening in the news.

Focus Next Week

Last week was mostly quiet, except for PCE data coming in on Friday, which cooled off slightly.

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Next week should be a whole lot more exciting, with big economic data releasing each day.

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I know I just talked about not using headlines to make trading decisions, but that doesn’t mean we don’t need headlines to get the markets moving in the first place.

Headlines often shake things loose and bring money in or out, shifting market flows in all different directions. These movements cause our systems to get active, so I’ll be expecting some shifting to our portfolio this week with profit targets getting hit, stopping out, or seeing new setups forming.

That’s it for this week.

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