Sunday, September 29, 2013

Gamma Update...9.29.13

We've made a minor portfolio adjustment to GAMMA by replacing UUP (US dollar) with XLE (Oil).  This change nudges the volatility a bit more but also provides a nore viable array of potential medium term runners....the type of 2-4 week momentum surges that can really boost the bottom line while simultaneously requiring almost no position trading adjustments.

For now XIV continues to dominate the # 1 slot although all the stops indicate the model should have gone to CASH around 9.20.  Why is that????

One reason, and a condition of using XIV in any portfolio, is that the extremely high beta of VIX almost guarantees that in order for it to be suoperceded by another portofliio component that component must be showing extraordinary momentum and relative strength when compared against the other portfolio components as well as XIV. 

Looking at the previous #1 leaders EEM and EFA (now #2 slots) in the 30 day % return column of the variables illustrates this point.  The differential gains between EEM and EFA and the rest of the pack are substantial revealing the true momentum surge that was occurring during that time period.
Our job is to keep an eye out for the next component to gain a #1's may very well turn out to be a breakout winner although, unfortunately, past performance is no guarantee of future results.