Sunday, October 27, 2013

SMALL WORLD Continues to Grow..10.27.13

The performance of the SMALL WORLD model has been a pleasant surprise over the past 3 months although it has sustained considerable more volatility that the SKEW values which are really volatility percentages.

The short term ALERT is now turning negative however and risk adverse investors may choose to scale back on position sizing or simply go to CASH until the next wave up.  After a run up of this magnitude its typical to see a retracement, at least short term.

At the same time the SPY/EFA pair, which historically exhibits a reliable correlation of % daily change has gone from a bullish divergence on 10.10 to its current situation which is fast approaching a zero cross. 
When and if that cross occurs the odds of a pullback increase substantially.