China To Determine Outcome Of 'Sell Roshahah, Buy Yom Yippur' Strategy

em>Joel Elconin is the co-host of

, a daily trading idea radio show.

Not all seasonable strategies work to perfection. For example, much of the returns from the January effect are determined by an investor's entry point in late December or early January. So far, that indicator has predicted a down year for the market, although the index traded at much higher levels from February through July. This year, the "Sell Rosh Hashanah and Buy Yippur" strategy appears to be working but not without a caveat. On the day preceding the first night of Rosh Hashanah, the S&P 500 index futures ended the September 11 trading session at 1950.25. Ahead of the Fed meeting and the quadruple witch expiration last Friday, the Street was convinced that the Fed would get the first interest rate hike in years out of the way, In anticipation of that, the indexes posted solid gains on Tuesday and Wednesday of last week. When the Fed disappointed by standing pat the move was cheered and then jeered. In last Thursday's volatile session, the index rallied to a post Flash Crash rebound high (2011.75) before crumbling. After climbing over the psychological 2000 resistance level for the first time since August 21 (Friday before the Flash Crash), it sharply reversed course to end the session at 1977.25. Friday's quadruple witch expiration started with index under pressure and ended that way as well, losing another twenty seven handles to close at 1950.50 (right at the Rosh Hashanah close). Monday's relief rally has been more than offset by today's steep decline instigated by worldwide economic growth concerns. Now the elephant in the room (China) may determine the actual outcome of the strategy. When Jews around the world congregate to ask for forgiveness for their sins on Tuesday night and Wednesday morning, the Chinese government will reveal their latest manufacturing PMI reading. Most likely, the investment world will awaken on Wednesday morning to either huge gains or losses in world bourses. If there was ever a time for the Chinese government to pull a rabbit out of the hat, it would be right now. With the world focused on the tepid economic growth in China and their indexes unable to distance itself from 18 month lows, a good PMI number is needed (that is if the data is accurate). If the Chinese cannot conjure up a good number, the index futures may very well be trading well into the 1800 handle and on its way to revisit the Flash Crash low (1821.75). If the Chinese PMI improves, all of the gains from this seasonal strategy may vanish and then some. For now, the best investment strategy for now (and since mid-August) may be flat, dumb and happy. And for good reason. With the introduction of a new Federal Reserve mandate last week, the global economy, the future course of Fed's action and world's economies remains a mystery.