It's Over {And A Ratings Change}

Well the debt ceiling/government shutdown crisis {if you could call it that} is over.  The politicos in Washington and investors behaved pretty much in line with what we outlined here last week.  Monster rally in the markets yesterday was the result.  Forget the folks that are worrying that we're going to be doing this all over again next winter.  I'm in the camp that says we're now moving away from debt-ceiling hostage taking.  Since the Republicans didn't pull the default trigger this time when one could argue that they had the best ammunition to do so with the rollout of the Affordable Care Act, then they're unlikely to do so again the next time around.

As we noted above the markets rallied hard yesterday, although they are giving some of that back today.  Probability and the playbook would indicate that stocks have the ability to rally into the end of the year.  I've been taking the volatility and market movement these past few weeks to put some new money to work for clients and reposition accounts.  To better reflect what we've been doing we are going to change one of our indicators.  We are going to move our intermediate term indicator to NET MARKET POSITIVE.  This is the same rating we carry on our longer term money flow indicators.  We will keep our shortest term indicator at NET MARKET NEUTRAL.  You can go here for a definition of what these terms mean.  Any changes we make in these indicators are based upon probabilistic analysis of market conditions and are meant to solely reflect the NET activity that has occurred in our client accounts.  We do not use these changes as a market timing mechanism.  If you are a casual reader of this blog, you should not construe these changes as a trading strategy that we employ across the board with all of our clients or attempt to emulate anything here as a personal strategy.  I have and continue to warn against this and therefore assume no responsibility if you ignore my advice.  

We lowered our intermediate and short term indicators to NET MARKET NEUTRAL back on February 21, 2013.  If you had taken this as an excuse to sell out your portfolios then you would have missed a pretty good rally in stocks as the S&P 500 is up about 14% since then.  Our change back then simply reflected that we were on balance neutral in our buying and selling of equities {as represented by ETFs} in client accounts.  On balance we've carried relatively lower cash positions during what are statistically seen as the weakest months of the year because we've felt that the underlying fundamentals of the markets were positive and warranted such an approach.   Again to reflect what we were doing for clients, we raised our indicators on foreign based ETFs to NET MARKET POSITIVE on July 15, 2013.  You can look at a chart of foreign based ETFs to see how they've done since mid-July.  I will not discuss individual security purchases or sales here but I'm happy to have a discussion with clients or readers about what we did in this area if you want to give me a call.

**Long foreign based ETFs in client and personal accounts.  Long ETFs related to the S&P 500 in client and personal accounts.  Also as a point of disclosure since we discussed foreign based ETFs today, you should know that we have an interest in adding to positions in certain of these which may or may not be occurring as we post if certain conditions are met.

Finally I will not be posting tomorrow.  Also as a heads up I will be away next Friday and possibly part of the week after.  Expect posting the week of October 28th to be sporadic.