Being Reactive

We heard a podcast this week hosted by author Michael Covel that reminded us of some of the oldest and wisest perspective provided by the then CEO of Exxon, Lee Raymond when he was on CNBC in 1998 discussing the pending merger between Exxon and Mobil. The commentator asked him what direction he thought oil prices were headed in the near-term. He replied (paraphrased from memory), “We gave up trying to predict the direction of oil price moves a long time ago. Instead, we have detailed strategies that if the price moves up to some extent, we execute Plan A, and if it goes down to some similar extent, we execute Plan B.”

In the Covel podcast, he compared and contrasted technical analysis of the capital markets as either being predictive or reactive in design and gave a clear message that reactive was far better and that it’s impossible to predict the future based on analysis of past numbers. That’s the perspective for the trend-following approach we use which reacts to price moves in either direction and also the degree of volatility of the price moves. The price data is loaded into our math models each night which outputs a simple decision – buy, sell, or adjust the stop loss. We try to mentally approach the market each day with an objective mindset, with no substantive opinion about the short-term direction of the market either way (long-term, however, we believe the market will trend higher due to inflation and innovation). Regardless, we recognize that within the span of the next month or even next year – a substantial move in either direction is possible – so we trade accordingly.

Forte Strategy Update

We executed 6 trades last week for a net gain of 1.1% compared to a loss of 0.6% by the S&P 500. Our YTD net results equal a 4.7% gain compared to a 2.1% YTD gain for the S&P 500. Our YTD max drawdown is 9.5% versus 33.9% for the general market. The account correlation to the S&P 500 remains low at 0.156.

More details about our trading activity can be found by registering on the Collective2 website and searching for Forte Strategy. A running list of these email blogs and general information about Maestro Capital Research can be found at

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