Each week we run our behavioral measures. Based on the behavioral model, India is the largest exposure with Malaysia and South Africa tied for the second largest exposure and South Korea the third. High yield corporate debt still looks attractive based on what we have seen in our models. We are concerned about India, Malaysia, and high yield corporate debt become over valued as the measures are heading toward unprecedented bullish territory which is a contrarian indicator. However, at the moment we do not see any reason to sell.
We also run a third agent-based measure which has predictive power for short-term movements. This week will we believe will indicate where the market is heading the next several weeks. Our indicator for the US hit 0.86. Last two times the measure hit 0.86 the market fell dramatically the next week. However, before those two periods the US market went up to 0.94 right before the flash crash. Stay tuned for the right time to sell India and high yield corporate bonds. We are still involved in that trade and whether our agent-based measure is correct about the next several weeks.
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