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Chademere Capital Insurance and Financial Services
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Weekly Market Commentary

June 15th, 2020

Chadd Mason, CEO The Cabana Group

Markets Show Important Reversal at Even More Important Level

Two weeks ago, we commented on the ongoing test faced by the broad indices at their respective 200-day moving average. We noted that if equity markets were able to regain and hold above that important technical level, we were likely to see prices move significantly higher as institutional money was forced off of the sidelines and back onto the playing field. Just as soon as we mentioned it, the S&P 500 did hold that level and closed out the week of June 5th above its 200-day moving average for the first time since March 4th. Prices exploded upward from the 3000 level all way to 3240 over six trading days. This move was technical more than the result of any significant improvement in underlying fundamental economic conditions, although, we did get a nice surprise with employment numbers.

As with all technical price movements, we are exposed to swift reversals as soon as the euphoria fades and profit taking by traders kicks in. Chairman Powell’s statement at the close of last Wednesday’s Federal Reserve meeting provided the impetus for just that. The selling began Wednesday afternoon and continued through Thursday and into Friday. Thursday saw all broad indices down more than 5%, for the largest one-day losses since March. The result was a plunge right back to the 200-day moving average. We saw a break below on Friday before a late afternoon rally saved a closing breach. In my mind, the fact that we were able to hold on the downside in the face of extreme volatility was a good sign. The more times we can survive a test here, the stronger the underlying market becomes. This testing of important support levels is a healthy part of the process in markets ultimately regaining their long-term footing. As you can imagine, I was very interested in how things would open this morning and watched the futures throughout the night.

Futures began dropping after midnight and by 5:00 this morning were down 3% – well below the 200-day moving average. At that point, another big leg down appeared likely today. Over the next three hours buyers stepped in and began chipping away at the losses. By the open, things were not entirely bleak and by 11:00 the S&P 500 had turned positive. By the market’s close, we had gone from down 3% in the futures market to up 1%. This is an important reversal at an even more important level. I cannot stress enough how reassuring it is to see smart money hold their ground, as well as new buyers step in, when weak hands have been washed out by a big time drop in price. We are certainly nowhere near out of the woods as an economy or a country, but recent market activity continues to impress.

At Cabana, we will continue to avoid predictions and take it day by day as the situation continues to unfold. We remain in our Moderately Bearish Scene and are prepared to reallocate in either direction as conditions warrant.

This material is prepared by Cabana LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.

This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.

Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV, Part 2. A copy of which is available upon request or online at www.adviserinfo.sec.gov/.

The Financial Advisor Magazine 2018 Top 50 Fastest-Growing Firms ranking is not indicative of Cabana’s future performance and may not be   representative of actual client experiences. Cabana did not pay a fee to participate in the ranking and survey and is not affiliated with Financial Advisor magazine. RIAs were ranked based on percentage growth in year-end 2017 AUM over year-end 2016 AUM with a minimum AUM of $250 million, assets per client, and growth in percentage assets per client. Visit www.fa-mag.com for more information regarding the ranking.

The Financial Advisor Magazine 2019 Top 50 Fastest-Growing Firms ranking is not indicative of Cabana’s future performance and may not be representative of actual client experiences. Cabana did not pay a fee to participate in the ranking and survey and is not affiliated with Financial Advisor Magazine. Working with a highly-rated advisor also does not ensure that a client or prospective client will experience a higher level of performance. These ratings should not be viewed as an endorsement of the advisor by any client and do not represent any specific client’s evaluation. RIAs were based on number of clients in 2018, percentage growth in total percentage assets under management from year end 2017 to 2018, and growth in percentage growth in assets per client during the same time period.  Visit www.fa-mag.com for more information regarding the ranking.

No client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for any investor. Asset allocation and diversification will not necessarily improve an investor’s returns and cannot eliminate the risk of investment losses. While loss tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account. It is the responsibility of the advisor to determine what is suitable for the client. An advisor should not simply rely on the name of any portfolio to determine what is suitable. Cabana manages assets on multiple custodial platforms. Performance results for specific investors may vary based upon differences in associated costs and asset availability.

Cabana claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a trademark of the CFA Institute. The CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To receive a GIPS Report and/or a firm’s list of composite/pooled fund descriptions please email your request to info@thecabanagroup.com.

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