On Monday, Dan Niles, founder of the Satori Fund, spoke to CNBC's Squawk Box about the current condition of the market.
Niles called for the S&P 500 to reach a low of 3,000, a low he noted that his fund has been saying since May 2022.
Niles thinks the market is headed lower, the Satori Fund covered its short positions Monday and was likely to add to its long positions.
He said that they thought cash was the best investment for retail investors unless they can day-trade, and the Satori Fund is sitting on 50% of its cash.
If there is a bear market rally, Niles suggested investing in companies with strong fundamentals, adding that the fund has started to nibble at the energy sector.
It may be an opportune time to scoop up energy shares ahead of winter, as the SPDR Select Sector Fund Energy Select Sector XLE is down about 15% over the past month.
Niles mentioned buying into defensive names like Walmart WMT because people tend to buy necessities during the recession.
Walmart was up 18% during the 2008 financial crisis, while the S&P 500 was down 38%.
Niles likes the health care sector as well as the online sports betting space, as the fund owns shares in DraftKings DKNG and purchased shares in PENN Entertainment PENN last Friday.
If you get a temporary bounce in the stock price, the Satori Fund's strategy is to make sure you can sell, then look to short again, Niles said.
Niles said that the reason his fund is up this year is due to its short positions and not its longs.
Niles said that investors should reshore these positions, because he expects PC and smartphone sales to be revised for the year, as well as everything that benefited from the pandemic.
Niles expects to struggle in the year 2023 as the pandemic is over and more people will be getting out, thus the reason for less software demand.
Niles said that this is an area they are looking to short, because Walt Disney DIS and Netflix NFLX are looking to launch their ad-supoorted tiers that will take money away from smaller media companies.
In the second quarter, Niles sold his entire stake in California-based technology firm Lumentum Holdings LITE, accounting for 64,200 shares, the fund's third-largest holding, as of the first quarter.
In the second quarter, the fund opened a stake in DraftKings, and it appears that it is bullish on online betting stocks. The Satori Fund purchased over 99,000 shares, making it the third largest holding, accounting for 4.1% of the total portfolio.