Tuesday, January 29, 2013

Risk/Reward in $SPX Based on Citi Economic Surprise Index

According to JPM, the last 7 times that the Citigroup Economic Surprise Index (CESI) went negative, over the next 3 months, the $SPX had average upside of just 1% versus an average downside of 8%. In other words, based on that indicator alone, your risk/reward here is 8:1 down. Note that CESI went negative last week (January 25).