Monday, September 30, 2013

WORLD Update...9.30.13

With the govt. shutdowm looming and the odds of a last minute resolution dimming I thought it might be interesting to see what going on with the World model.  A bit surprising perhaps but EWJ (Japan) has jumped into the # 1 slot.  I say this is surprising because EWJ usually tracks the momentum of XLF (US financials) but with a greater volatility.  At this point we are seeing a divergence apparently based on macroeconomic conditions. 
The TrendX indicators are close to going VESTED again, although for the time being the indicated portfolio status is CASH per the P6.

Past metrics have shown that the first day of he month is typically bullish (about 75%) but if the shutdown does happen we may expect a 2-3% drop in the SPY, which is what happened the last time this condition transpired.  That's the bad news.  The good news is that there's likely to be a blockbuster rally when funding is resumed.  The $64 question is, of course, when...and just an bad can things get get before the shutdown is resolved.

One strategy is to buy some out of the money calls on the SPY out at least 30 days (which takes you to November).  This is just an idea and not a recommendation.