Weekly Risk Report 11/03/2008
The last few weeks we've seen the i-Wave Market Risk indicator lower than it's ever been since the beginning of 1982. The composite of the four components shows market risk to have essentially evaporated for diversified portfolios.
Again this week three of the four components are deep in their own bullish territory while the fourth remains neutral and of no real consequence. These three components are in the lowest 2% of all their historic data relative to risk and IPO activity continues to be essentially zero. Only December of 1974 would have offered a lower Relative Valuation than we currently see.
While it might seem a bit late that this new low is being reached, we depend upon Value Line and Barron's for the data on which the i-Wave is based. The Value Line data tends to lag "real time" by about 1 full week. Based upon what we are seeing and last week's mild rebound for the Dow 30, the Nasdaq Composite and the Standard and Poors 500 indexes it appears much firmer footing has been found. Assuming that Tuesday brings a 'clean' election with no chads cluttering up the results, we should start to see the return of more orderly market movement. The next two quarters will remain emotional with earnings being watched and, most likely, over analysed.
We continue to watch both the domestic and non U.S. markets carefully. We're also watching the financial sector with great interest. Exchange rates are still moving around daily but the moves are not as dramatic as a few weeks ago. Our Financial, Biotech and Telecomm ETF holdings are rebounding nicely so far. The Energy sector rose some last week but is weak as of this AM.
The i-Wave gave us fair warning of high risk in the market place in 2007. It now continues to guide us through an unusually turbulent period on the stock exchanges, world wide.
