Weekly Risk Report 03/23/2009
The week has started off to be busy. Some selling occurred in both the Energy and Basic Materials sectors for two of our portfolios. That’s an encouraging sign as we’ve been mostly doing buying for many months in these two sectors. Both sectors have risen significantly in recent weeks. Here’s a short history showing the recent activity:
This portfolio was started with a very low level of cash reserve as our Risk Indicator has been in the bottom 10th percentile of its range for quite some time. So, this first sale adds some cushion and some latent purchasing power to the holding for the future.
The strong market activity for the last two weeks has helped many of the business sectors. With such a strong upward move we see three of our four market measures rising slightly in their evaluation of risk. However, all components are still showing very strong bullish signals. Seeing these slight rises in measured risk serves two purposes, 1) to execute Sell orders as our targets are reached and 2) make sure our Equity/Cash balance remains appropriate for the market risk.
While the number of “new 52 week highs” is still small, the number of “new lows” is shrinking quickly with the change in market attitude. Speculation is measurable, but still miniscule compared to historical norms. With interest rates and P/Es remaining very low, our Relative Valuation component is exceedingly bullish right now. The stock markets tend to anticipate what the economic conditions are going to be in the future. If true again, this would suggest the markets see economic recovery starting 6 to 12 months out. At what speed and to what level there is recovery is still undetermined. Our SignalPoint process will be at work, however.
