Weekly Risk Report 06/29/2009
The consolidation of rapid gains of the last quarter continued this last week. While not as exciting as watching a Cape Canaveral launch, it still has been far more comforting than the previous two quarters. The Price/Earnings ratio as represented in Value Line had been rising rapidly but has now moderated since June 1st. This is true of both the larger and smaller cap markets. Short term Treasury rates remain extremely low by historical standards, even the 20 Year Treasury rate remains below 4.4%. The effect is seen in our Relative Valuation component falling back from where it was at the start of June. It remains bullish.
The inevitable separation of better and not-so-good companies has started to appear. The stronger companies’ stocks have held up well during the consolidation while the weaker ones have settled back. This has kept our Speculation component falling back toward a more normal range. It remains short term bearish this week.
Overall, most market participants have continued to drive more stocks toward new 52 week highs than toward lows. Out of the 6000+ stocks on the NYSE and the Nasdaq Composite Index only 32 hit new lows last week. This compares favorably to the 152 companies that managed to touch new highs. So, our Divergence component is bullish again this week.
Finally, there remains a slight net contraction in the number of issues available for trading each week. Our Zeal component measures this and shows the direction to be slightly bullish again this week.
The week saw a sale of 5% of the Healthcare position in Signal 10 portfolio, a sale of 5% of the Euro holding in Currency Point portfolio and a similar amount of a REIT holding in the Moderate Income Point portfolio. We also had a 5% sale in the shares of the 20+ year Treasury bond fund in our CU Income Plus portfolio. While the money market rates are very low, these sales have only just started to refund our usually generous reserves and don’t affect overall dividend performance of the portfolios to any significant degree.
