Dear Investor,
I concluded last month's overview with "Cyclically speaking, March is a weaker month of the year. The saying goes, 'March comes in like a lion and goes out like a lamb.' The question that can be asked here is, 'Does this also apply to the coming trading month?'"
The answer is now known. The SP-500 index closed March with a loss of -5.8%. The Small Cap index, Russell 2000, closed the month with a loss of -7.1%. ESSC also ended the month negatively with a loss of -5.75%. For the entire year, there is a loss of -11.80%.
From now on, I will only use the Russell 2000 as a benchmark. The SP-500 will be disregarded.
LRN shares were the biggest losers. HALO was our only winner last month.
This is the third week that the system has held cash. In hindsight, that was the right signal, especially considering yesterday's sharp declines. The Russell 2000 lost another 6.42% yesterday on news of the trade war.
When money is not invested and is held in cash, it is (in my opinion) less worrying to see the stock markets falling sharply. This means there are more 'bargains' to be found. The question on everyone's mind is: "Has the market now bottomed out?"
Of course, no one knows that! You can only say that in hindsight. When you're not invested, it doesn't really matter whether today is the bottom or whether it might be a month from now and another 10% lower.
Once the bottom has been reached, the sharp declines will gradually become smaller (i.e., less volatility) and the markets will resume their upward trend. ESSC will then also re-enter the market and hopefully be able to recoup its losses.
Please note the following: some of you are following the ESSC system with a factor of 2 or higher. That is, of course, welcome. However, I would like to point out that ESSC is a more volatile system than, for example, ES Stock Trading or ES Buy & Hold. If volatility is an issue for you, you may want to consider participating in one of the other two systems. These two are less volatile and also offer a decent return.
I myself follow my three systems with 110% of my capital. I have invested 55% of that money in ESBH, 34% in ESST, and 21% in ESSC. The reason I have divided it up this way also has to do with volatility.
April did not start strongly at all, and technically speaking, it could go even lower, but for all we know, the bottom could be in place today. We will find out on May 1.
Sincerely,
Henry van Ginkel