February 2017 Commentary

March 13, 2017

Dipsea Capital Fund LP  

 

February 2017 Commentary: 

  

The Dipsea Capital Fund returned .74% to clients for the month of February, its 7th consecutive, positive monthly return.  The fund is up 1.53% year to date after fees.  Of the 20 trading days in February, the fund generated positive returns 75% of the time.

 

As we’ve noted in previous commentaries, many of the statistical tools we employ to guide our analysis on an intermediate term basis, have been flashing worrisome signals for weeks.  Yet the markets continue to grind higher.  What is at work?

 

On the positive side of the ledger, market price momentum remains strong, interest rates remain low, and economic activity across the globe is gaining strength.  Furthermore, March tends to be a seasonally favorable period for the markets. 

 

On the other hand, the recent IPO of Snapchat, with its atmospheric valuation, informs us that retail investors have returned to the markets, and provides more evidence of excessive bullishness among the investing public.  What this behavior often signals is excess, which is ultimately corrected through lower prices, or time.  Another phenomenon we witnessed this week for the first time in 50 days is more stocks making new 52 week lows than new highs:  an occurrence that signals a loss of upward price momentum.  Also, indexes which measure investor fear are at extreme lows, signaling complacency, which often portends lower prices ahead.

 

Regardless of our intermediate term stance, we remain focused on our short duration strategy which historically has generated consistent, uncorrelated returns for our clients.  We feel good about our ability to offer a strategy which complements one’s regular equity portfolio, and doesn’t possess the risk associated with a bond fund, should interest rates move higher.

 

Please accept our appreciation for the trust you place in us as a steward of your capital.

 

 

Sincerely,

 

Chris Antonio

 

 

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