Weekly Risk Report 08/25/2008
This week's i-Wave shows the stress of the markets we saw last week. While the Dow 30 and the S&P500 moved downward only slightly, the Nasdaq Comp. gave up the most. Declining stocks were nearly double the number of advancing issues. New 52 week highs dropped to the lowest level in six weeks. Ahead of the Democratic National Convention, it seemed all had decided the only direction for the market was going to be DOWN. With Speculation nominal, Divergence on the threshold of bullish, Relative Valuation already quite bullish and the Zeal component finally normalized to the new Barrons data stream, we see the IW has retreated back into the Low Risk area for both the larger and smaller cap stocks.
As the political conventions come and go, the markets will still wait until there's a strong consensus on who the next president may be. If it is "too close to call" in the time leading up to November, the markets will continue to languish.
This AM on CNBC they were discussing housing sales, both new and pre-owned and the current national inventory of homes. What struck me was the rather large "adjustments" to previous months' data. I don't know how anyone can place investment "bets" on such data when the following month adjustments as large as 6% or more are made. This helps confirm that even with the speed of reporting today, the quality of information is only as good as its source.
With no significant change in pattern, I think we can remain confident that this is truly a relatively low risk environment in which to invest. I'm doing a study on the relationship of the Value Line dividend, P/E and index history to see if we can learn a bit more about the quality of the P/E designation. In the past it has been pretty good, but because earnings don't always meet expectations, it can be misleading.
