Dear Investor,
Wall Street took a breather this month.
Positive operating results were assessed more critically, and attention shifted more toward geopolitical developments and the question of how sustainable the AI-driven rally really is.
The Russell 2000 closed February slightly higher with a return of 0.68%.
The ES Small Cap system had a weaker month and ended virtually unchanged at -0.10%.
Although this may seem disappointing, such a move is consistent with the normal course of a strategy focused on longer-term growth.
A notable moment this month was the market's reaction to NVIDIA's quarterly results.
The company once again presented figures that exceeded expectations.
In after-hours trading, the share rose by approximately 5%, but during regular trading hours, this reversed completely and NVIDIA ultimately closed 5.46% lower.
These types of price reactions are often telling. When strong news is not rewarded by the market, this usually indicates a more cautious or negative sentiment among investors.
Conversely, when bad news is hardly punished, market sentiment can actually be robust.
Within the portfolio, Century Aluminum Company was the biggest decliner in February.
ACM Research managed to stand out positively and was the strongest contributor to the month's results.
This once again underlines how important diversification and dynamic risk management remain within the system.
Based on the most recent signals, the algorithm has temporarily reduced exposure.
We are currently not invested in ES Small Cap. This more defensive positioning is deliberate, as the short-term indicators have become less positive.
Once market sentiment and technical signals improve again, the allocation can be scaled up again towards full investment.
In addition, geopolitical risk has recently increased. This weekend, attacks were reported between Israel and Iran.
The market reaction in the coming days will be important.
Historically, we have seen that markets sometimes remain surprisingly resilient in the face of geopolitical tensions, but increased volatility is to be expected.
If the market copes well with the turmoil and the signals improve, we expect to be fully invested again next week.
For now, we will continue to strictly follow risk management and act based on the signals from the model.
Discipline is essential, especially during phases when sentiment is shifting.