Saturday, November 17, 2012

The Long & Short of It...

As the pundits lob causations with all the conveniences of political theater (see Here), the US dollar index continues to follow the long-term arc of its last secular low - regardless of both quantitative and political influence. 
And while the implications of a strengthening dollar should not be underestimated, investors have had the opportunity to take advantage of another secular shift - that being large cap stocks outperforming higher beta indices - such as the Russell 2000. 
Above chart from October 24th - "Secular Tides" 

One of the least volatile and most profitable pairs trades since the US dollar index bottomed (see Here) in May of 2011 - has been long the S&P 500 / short the Russell 2000. This "secondary tide" was first mentioned back in January of this year (see Here). 
For those investors with timeframes a bit longer than the average news cycle, this secular thesis appears to have plenty of road left to run. 

With that said, investors looking for a more ideal entry - may want to let the equity markets retrace (see Here) some of their most recent losses. 

As always - Stay Frosty