Today we saw an a-typical scenario: the S&P 500 fell slightly even as the DJI and COMPX recorded modest gains. This condition revealed our high level of exposure to this index relative to the general market – though this downturn is likely to reverse itself tomorrow as earnings season picks back up.
Energy was also weak today on signs of a warming trend in February that once again contradicts previous forecasts. However, with extreme low temperatures and snow storms throughout the North East later this week we see a better opportunity to adjust our energy exposure later in the week. Today’s slide is likely to reverse itself by Friday, but we aren’t yet confident enough in the forecasts to open any new positions on that information.
Today also saw a strong rally in the dollar on news of political turmoil in Europe (specifically France and Greece) which is always bearish news for the energy sector as it drives out foreign investors.
This combination of S&P500 weakness and an energy market slide caused us to strongly underperform today, but we expect a reversal within the week and have no plans to change any of our existing positions in the short term. It’s possible that renewed fighting in Ukraine will cause the Euro to fall further which will continue to be a challenge for the energy sector, but we anticipate that colder weather later this week coupled with our particularly strong exposure to Natural Gas will provide us with strong gains by Friday.