Weekly Risk Report 02/02/2009
There's been enough unsettling news around that the markets, if they were poised to drop further, could have declined and maybe even eclipsed the November lows by now. I'm somewhat surprised by its resilience. Inside the data we review weekly there appears to be money shifting around, finding new homes for the next moves. Note that the NYSE Daily Breadth has actually been healthier than the Dow 30 in recent weeks.
(Courtesy of BARRON'S)
We're starting to see more balance in the Advance/Decline ratio on a weekly basis. So money is shifting positions, but not necessarily exiting the market as it was during the '08 Panic.
Our four i-Wave components all remain decidedly bullish. There are early signs of speculative activity warming up, however. This is to be expected after markets have declined so steeply. At this point we can consider it rebound or maybe reflex reaction. It appears the speculation is hotter in the smaller cap stocks right now and the larger caps are still pretty cool. New 52 week highs remain very low by historical standards, however, indicating that any speculative activity is focused on a very tight group of stocks.
The cumulative effect of all the below average risk data since near the start of 2008 shows up nicely in our i-Wave Cumulative Risk graphic.
In it we see the two previous years of continual above average risk followed by a slow decline through the first 3 quarters of 2008. Then we see the slope steepen as risk declined precipitously and remained low right through the end of January.
We continue to monitor Earnings, Interest Rates, Speculation, Investor Sentiment and IPO activity for signs of rising risk. Right now it is quiet on essentially all fronts.
