February 2010 Market Outlook & January 2010 Performance Update
IN REVIEW | January 2010 & the Month Ahead
The hangover of the December holidays typically lingers a few weeks into the new year and 2010 was no exception. Tight ranges in the S&P gave us very few trading setups early in the month. We spent a protracted amount of time out of the market. As the month wore on and equity prices began to deteriorate, our programs managed to find a few suitable trading situations. The late month expansion in volatility notwithstanding, opportunities remained few and far between and as such, ROE Capital turned in a positive month with below average trading volume. (For more information on our managed futures performance, please review our complete January performance report at https://www.roecapital.com/perform.asp).
Our correlation to the S&P has begun to reverse, which is good as I expect the S&P to be under pressure all year. Our managed futures colleagues (represented in the NewEdge CTA Index above) struggled in January as well, with trends proving elusive in many markets.
The better than expected GDP reported in January failed to reverse the equity losses of the month. All of the major averages took out their December lows which, as I noted in my year end review, is a bad omen for 2010 equity prices. After the beginning of the month bounce, the January jobs report looms large. Since February is seasonally the second worst performing month for the S&P, a catalyst will be required for a rally to gain traction.
A rally might materialize from a much stronger than expected jobs report building on strong ISM numbers.Without that catalyst, the S&P should move sideways to lower throughout February. The geopolitical situation looks to add pressure to equity prices as well. Iran is bristling over the US decision to deploy a patriot missile shield in the Persian Gulf. China is moving to cap its real estate bubble through tighter monetary policy, which will negatively impact global growth. Greece is facing what Moody’s called a “slow death” as it is unable to attract buyers for its debt at sustainable rates.
Taken in total, equities face an uphill battle in February. It is my hope that this added pressure will reveal more trading setups for my models.
John L. Roe
President, ROE Capital Management
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.An investment with ROE Capital Management is speculative, involves a high degree of risk and is designed only for sophisticated investors who are able to bear the loss of more than their entire investment. Read and examine the disclosure document before seeking ROE Capital Management’s services.
ROE Capital Management, Inc. | 125 South Wacker Drive | Suite 300 | Chicago, IL 60606
312-436-1782, office | 312-212-4073, fax | info@www.roecapital.com | www.roecapital.com